Citation: 2013 TCC 116
Date: 20130422
Docket: 2012-4957(EI)
BETWEEN:
MICHEL THERRIEN,
Appellant,
and
THE MINISTER OF NATIONAL REVENUE,
Respondent.
REASONS FOR JUDGMENT
Graham J.
[1]
Michel Therrien is a highly
trained executive chef. From July 15 until December 4, 2011 he was the executive
chef at Hastings Resort Inc. (“Hastings Resort”). After he stopped working at
Hastings Resort, Mr. Therrien applied for employment insurance benefits. As a
result of that application, the Department of Human Resources and Skills
Development Canada requested a ruling as to whether Mr. Therrien was
engaged in insurable employment with Hastings Resort. The Minister of National
Revenue ruled that Mr. Therrien was not engaged in insurable employment and that
ruling was upheld on appeal. Mr. Therrien has now appealed the ruling to this
Court.
[2]
The sole issue in this
Appeal is whether Mr. Therrien was engaged in insurable employment with
Hastings Resort. Mr. Therrien takes the position that he was an employee. The
Respondent takes the position that Mr. Therrien was an independent contractor.
Ontario Ministry of Labour Ruling
[3]
The Ontario Ministry of
Labour conducted an audit of Mr. Therrien’s working relationship with Hastings
Resort and concluded that he was an employee. Mr. Therrien attached a copy of
the Ontario Ministry’s Reasons For Decision to his Notice of Appeal and sought
to rely heavily on that document as proof that he was an employee. While I
accept that the Ontario Ministry conducted an audit and came to the conclusion
that Mr. Therrien was an employee, that conclusion is not binding on me nor are
the facts set out in the Reasons For Decision evidence. I have not reviewed the
Reasons For Decision. I explained to Mr. Therrien at trial that if there was
any factual evidence contained therein that he felt was important he needed to
testify as to that evidence himself.
Law
[4]
In its recent decision
in 1392644 Ontario Inc. v. M.N.R., 2013 FCA 85, [2013] F.C.J.
No. 327, (“Connor Homes”), the Federal Court of Appeal clarified
the test that is to be applied in determining whether a worker is an employee
or an independent contractor. At paragraphs 39 to 42 of Connor Homes,
the Court stated that the correct test to be applied is a two-step test:
[39]
Under the first step, the subjective intent of each party to the relationship
must be ascertained. This can be determined either by the written contractual
relationship the parties have entered into or by the actual behaviour of each
party, such as invoices for services rendered, registration for GST purposes
and income tax filings as an independent contractor.
[40]
The second step is to ascertain whether an objective reality sustains the
subjective intent of the parties. As noted by Sharlow J.A. in TBT Personnel
Services Inc. v. Canada, 2011 FCA 256, 422 N.R. 366 at para. 9, “it
is also necessary to consider the Wiebe Door factors to determine
whether the facts are consistent with the parties’ expressed intention.” In
other words, the subjective intent of the parties cannot trump the reality of
the relationship as ascertained through objective facts. In this second step,
the parties [sic] intent as well as the terms of the contract may also be taken
into account since they colors [sic] the relationship. As noted in Royal
Winnipeg Ballet at para. 64, the relevant factors must be considered “in
light of” the parties’ intent. However, that being stated, the second step is
an analysis of the pertinent facts for the purpose of determining whether the
test set out in Wiebe Door and Sagaz has been in fact met, i.e.
whether the legal effect of the relationship the parties have established is
one of independent contractor or of employer-employee.
[41]
The central question at issue remains whether the person who has been engaged
to perform the services is, in actual fact, performing them as a person in
business on his own account. As stated in both Wiebe Door and Sagaz,
in making this determination no particular factors is dominant and there is no
set formula. The factors to consider will thus vary with the circumstances.
Nevertheless, the specific factors discussed in Wiebe Door and Sagaz
will usually be relevant, such as the level of control over the worker’s
activities, whether the worker provides his own equipment, hires his helpers,
manages and assumes financial risks, and has an opportunity of profit in the
performance of his tasks.
The application of the test
[42]
… The first step of the analysis should always be to determine at the outset
the intent of the parties and then, using the prism of that intent, determining
in a second step whether the parties’ relationship, as reflected in objective
reality, is one of employer-employee or of independent contractor. …
[5]
Based on the foregoing,
I will first examine the intentions of Mr. Therrien and Hastings Resort and
then consider whether the objective reality of their relationship was
consistent with those intentions.
Intention
[6]
Mr. Therrien testified
that he first met with the owner of Hastings Resort and his son on July 14,
2011. At that meeting, the parties negotiated
the terms of Mr. Therrien’s contract. One of those terms was that Mr.
Therrien would be retained as an independent contractor. Mr. Therrien began
work immediately. I accept this evidence as proof of Mr. Therrien’s intention
at the time the relationship began. Given that Hastings Resort continued to
take the position that Mr. Therrien was an independent contractor, I also
accept that it too intended the relationship to be an independent contractor
relationship.
[7]
Mr. Therrien testified
that the terms of the contract were that Hastings Resort was to pay him $700
per week after taking any deductions required by law. Mr. Therrien was unable
to describe what deductions he thought would be required to be taken from him
as an independent contractor. The only conceivable deductions would be the
source deductions normally taken from an employee (i.e. income tax, EI and
CPP). I cannot imagine why Hastings Resort would have agreed to pay Mr.
Therrien an amount net of source deductions. It is illogical that the parties
would enter into a contract intending for Mr. Therrien to be an independent
contractor and, at the same time, contemplate statutory deductions being taken.
Either Hastings Resort and Mr. Therrien had a joint intention at the beginning
of the contract that Mr. Therrien would be an employee or no such term
regarding source deductions existed. Since I have already concluded that their
joint intention at the beginning of the contract was that Mr. Therrien be an independent
contractor, I must conclude that there was, in fact, no term requiring source
deductions. Based on the foregoing, I accept that the agreement was for Mr. Therrien
to be paid $700 per week but do not accept that the agreement called for that
amount to be net of any deductions.
[8]
Mr. Therrien testified
that Hastings Resort also agreed that after 2 months it would increase his
weekly pay by $200 after deductions. He stated that he was never given the
increase. I accept that the agreement called for an increase of $200 and that
he did not receive that increase but, for the reason set out above, I do not
accept that the increase was to be net of statutory deductions. I also do not
accept that the increase was to occur after 2 months although nothing turns on
this timing.
[9]
Finally, Mr. Therrien
testified that Hastings Resort agreed to provide him with transportation from
his home to the resort. He stated that this transportation was never provided.
I accept his evidence on this point.
[10]
Mr. Therrien concedes
that, from July 14 to August 14, 2011 the intentions of both parties were that
he be an independent contractor. However, he testified that that intention
later changed.
[11]
Mr. Therrien testified
that the parties agreed to put their agreement into writing within 2 weeks of
July 14, 2011. He stated that when 2 weeks passed without any written contract
being produced, he began pressuring Hastings Resort to provide one.
Approximately one month after Mr. Therrien began work, the contract had still
not been produced. As a result, Mr. Therrien testified that he unilaterally
decided that the contract by which he agreed to become an independent
contractor was void and that he would thereafter be working as an employee. Mr. Therrien
stated that he did not inform Hastings Resort of his unilateral decision at
that time. I do not accept Mr. Therrien’s evidence on most of the foregoing. I
accept that a written contract was supposed to have been provided and was not
but I do not accept that Mr. Therrien decided to change his status from
independent contractor to employee nor do I accept that he ever said anything
to Hastings Resort about a change in status prior to his quitting work in
December 2011 nor do I even accept that his intention to be an independent
contractor changed. I do not accept Mr. Therrien’s evidence on these points for
the following reasons:
(a)
One cannot unilaterally
change the terms of a contract. Either one terminates the contract by notifying
the other party or one amends the contract through negotiations with the other
party.
(b)
Even if one could
unilaterally change the terms of a contract, nothing actually changed in Mr.
Therrien’s relationship with Hastings Resort on August 14, 2011. Mr. Therrien
continued working in the same manner that he had done throughout the first
month of the contract and continued being paid in the same manner as he had
always been paid. He was unable to point to any way in which his working
relationship had changed.
(c)
Mr. Therrien sent an
email dated December 7, 2011 to Hastings Resort in which he stated “IT AS BEAN
6 MONTHS THAT I AM WAITING FOR THAT PROMISSE CONTRACT NO RESOLT”. If Mr.
Therrien had truly changed his status to that of an employee then he would not
still have been waiting for his independent contractor contract in December.
(d)
When asked on
cross-examination when he informed Hastings Resort about his supposed
unilateral decision Mr. Therrien was evasive. He suggested that he had told the
owner’s son about his decision at a party but said he could not recall when the
party occurred.
[12]
The Respondent filed an
affidavit sworn by the CRA Litigation Officer in this matter. While I accepted
the affidavit for filing, I have given much of its contents no weight. Attached
as exhibits to the affidavit were copies of various CRA letters and electronic
reports relating to previous disputes involving Mr. Therrien. My
understanding is that the Respondent was relying on the affidavit for 3
purposes.
(a)
The first purpose for
filing the affidavit was that the Respondent wanted me to accept that the
documents attached thereto showed that Mr. Therrien has, on 3 previous
occasions, been in disputes with restaurants where he took the position that he
was an employee and the restaurant took the position that he was an independent
contractor. I am willing to accept this evidence for two reasons. First,
letters attached to the affidavit support the fact that 3 rulings have
previously been issued in respect of Mr. Therrien. Second, Mr. Therrien
himself admitted on cross‑-examination that he had been in 3 previous
disputes with restaurants where he took the position that he was an employee
and the restaurants had refused to give him a record of employment. Mr. Therrien
stated that he was unable to recall the position taken by the restaurants in
the disputes. I do not believe him as he showed willingness to have a selective
memory when it suited him. Logically, the only reason that a restaurant would
have refused to provide a record of employment in the circumstances was if the
restaurant believed that Mr. Therrien was an independent contractor. Therefore,
I accept that the restaurant took the position that Mr. Therrien was an
independent contractor but I accept that fact not because of the affidavit but
rather because of Mr. Therrien’s testimony.
(b)
The second reason for
filing the affidavit was that the Respondent wanted me to note an alleged
similarity between the positions taken by Mr. Therrien in his disputes with the
restaurants and the position taken by him in this Appeal as well as the
similarities between the positions taken by the restaurants and the positions
taken by Hastings Resort in this Appeal. I am not prepared to do so. Those
positions were outlined in reports attached to the affidavit. The types of
reports in question are typically prepared by CRA employees based on
information gathered by them personally or on information gathered by other CRA
employees or on information provided to the CRA by the payors. None of those
people was available for cross‑examination. The affidavit was filed under
subsection 102(9) of the Employment Insurance Act. That subsection
states that:
An
affidavit of an officer of the Canada Revenue Agency stating that
(a) the officer has charge of the appropriate records, and
(b) a document annexed to it is a document or a true copy of
a document made by or for an employer, the Minister or a person exercising the
powers of the Minister,
is
evidence of the nature and contents of the document and is admissible as
evidence and has the same probative force as the original document would have
if it were proven in the ordinary way.
I accept that that subsection allows the
affidavit to be filed for the purpose of proving that the reports in question
were prepared and contained the information that they purport to contain. I do
not accept that the subsection requires me to accept the contents of the
documents as being true. Counsel for the Respondent wanted me to focus on
statements made in the reports that described the positions taken by the
restaurants in question. He stated that I did not need to accept the
restaurants’ positions as being true but simply that they were the positions
that the restaurants had taken. Subsection 102(9) does not permit me to do even
that. The positions described in the reports were not written by the
restaurants themselves. They were written by a CRA employee. While they are
presumably an accurate description of that employee’s understanding of the
restaurants’ positions, I have no way of knowing whether they are an accurate
representation and no one was available to be cross-examined on that point.
(c)
The third purpose for
filing the affidavit was that the Respondent wanted me to note that the
Minister had issued rulings on all 3 of the disputes well before Mr. Therrien
worked at Hastings Resort. I accept that the affidavit establishes that fact.
[13]
Based on the affidavit
evidence and on Mr. Therrien’s testimony on the disputes covered in the
affidavit, I find that at the time Mr. Therrien entered into his agreement with
Hastings Resort he had a good working knowledge of the difference between being
an independent contractor and being an employee. While I do not believe that
such knowledge is necessary for a worker to have intended to be an independent
contractor, it is a factor which, if present, supports the worker’s intention. I
do not draw any conclusions from Mr. Therrien’s history of disputes with
restaurants as I have insufficient evidence of the facts of those disputes to
do so. For the same reason, I do not draw any conclusions from the outcomes of
those disputes.
[14]
Based on all of the
foregoing, I find that Mr. Therrien and Hastings Resort shared a common
intention that Mr. Therrien be an independent contractor. Since I also find
that that intention continued throughout the term of Mr. Therrien’s work, I do
not need to consider whether a change in intention by one party during the
period in which the work takes place can vitiate the intention of the parties
at the time the contract was entered into.
[15]
Having found that the
parties intended an independent contractor relationship, I must now consider
whether that subjective intention was supported by the objective reality of
their relationship.
Control
[16]
Mr. Therrien was in
charge of the entire restaurant operation at Hastings Resort. He oversaw not
only the preparation of the food, but also the hiring and training of all
employees (both kitchen and service), the creation of the menu, the selection
of suppliers, the ordering of the food from those suppliers and the negation of
the terms of payment with those suppliers. In his words, he was “running the
show”. He testified that the owner of Hastings Resort had never been in the
restaurant business and thus did not know how to run a high-end restaurant.
While the complete control that Mr. Therrien was given over the operations of
the restaurant and the lack of supervision of his activities are not
inconsistent with an independent contractor relationship, Mr. Therrien is a
highly trained and experienced executive chef. Given the owner’s lack of experience,
it would not have been possible for him to supervise Mr. Therrien even if he
had wanted to. Thus I do not consider the lack of supervision and control to be
useful in determining Mr. Therrien’s status.
[17]
Due to Mr. Therrien’s
high level of training, it would similarly have been impossible for Hastings
Resort to train Mr. Therrien so I do not consider this factor to be useful in
determining his status.
[18]
I do not consider the
location where the work was performed to be a useful factor as, due to the
nature of the work, it was required to be performed at the restaurant
regardless of the working relationship.
[19]
Mr. Therrien did not
hire any assistants. He indicated that he could not afford to do so. This
suggests that he had the ability to do so but chose not to. This is consistent
with an independent contractor relationship.
[20]
The owner’s son was the
manager of the resort. Mr. Therrien testified that on a number of occasions he
told the son to stop speaking on his cell phone in the restaurant, to stop
swearing in the restaurant and to dress more appropriately when coming into the
restaurant. Counsel for the Respondent wanted me to conclude from this that Mr.
Therrien was treating the son as an equal rather than as a supervisor. While I
would normally agree with counsel on this point, Mr. Therrien struck me as an
abrasive individual who would not hesitate to speak his mind regardless of any
hierarchical relationship between him and the person to whom he was speaking.
As a result, I do not find this factor helpful.
[21]
Mr. Therrien testified
that he was permitted to provide his services to others at the same time that
he was working at Hastings Resort. He stated that he did not exercise that
right. This is consistent with an independent contractor relationship.
[22]
Mr. Therrien stated
that he worked 6 days a week providing lunch and dinner from opening until
closing. He explained that he was free to come and go from the restaurant as he
wished but, since he had not yet had the chance to train the staff adequately,
the restaurant could not function without him so he was effectively required to
be there at all times. The potential to come and go is consistent with an
independent contractor relationship.
[23]
Mr. Therrien recorded
his work hours in his personal calendar. He did not give this information to
Hastings Resort. Hastings Resort did not require him to keep these records. As
it is unclear why he recorded the hours, I do not find this factor helpful. The
best that can be said is that it does not indicate an employment relationship.
[24]
The Respondent
submitted that the fact Mr. Therrien simply quit rather than giving 2 week’s
notice to Hastings Resort was indicative of an independent contractor
relationship. Mr. Therrien testified that his relationship with Hastings Resort
had deteriorated to a point where he could no longer continue to work there. In
those circumstances, while an employee may have been required to give notice,
it would not be unusual for him or her not to do so. Therefore this evidence is
not helpful.
[25]
Mr. Therrien created a
number of “signature dishes” for Hastings Resort. These were menu items that he
had created that were not available anywhere else. Mr. Therrien maintained
ownership of these signature dishes. When he quit, he demanded that Hastings
Resort stop using those dishes and demanded that the Resort pay him a fee of
$300 a day for the use of his name and the signature dishes. This evidence
strongly supports an independent contractor relationship.
[26]
Overall, the level of
control is objectively consistent with the parties’ intention that Mr. Therrien
be an independent contractor.
Tools
[27]
Mr. Therrien provided
his own very expensive set of knives. He also provided his own chef’s uniform.
[28]
If Mr. Therrien was in
business for himself, it was the business of providing chef services, not the
business of running a restaurant. Thus the premises, furniture, fixtures and
equipment are not tools that he would have been expected to supply. There are,
in fact, very few tools that would have been required to provide that service.
[29]
Overall, while the
provision of tools is objectively consistent with the parties’ intention that
Mr. Therrien be an independent contractor, I give little weight to this factor
when considering the objective evidence as a whole as so few tools were
actually required.
Chance of
Profit
[30]
Mr. Therrien was paid a
flat amount per week. However, his hours were not set. His calendar shows that
he worked fewer and fewer hours as the months progressed. As he testified that
the restaurant’s business grew during his time at Hastings Resort, I can only
conclude that Mr. Therrien found a way to be more efficient and thus to earn
the same money with less effort.
[31]
Mr. Therrien testified
that there was supposed to be some sort of bonus paid to him based on the
performance of the restaurant although he did not provide any details.
[32]
Overall, Mr. Therrien’s
chance of profit is objectively consistent with the parties’ intention that he
be an independent contractor.
Risk of Loss
[33]
Mr. Therrien entered
evidence showing that suppliers billed Hastings Resort, not him. I do not find
this evidence helpful. If Mr. Therrien was an independent contractor, he was
retained to provide executive chef services, not to operate a restaurant and
thus would not have been expected to purchase the food with his own money.
[34]
Other than his costs of
maintaining his uniform and his knives, Mr. Therrien had no expenses.
[35]
Overall, Mr. Therrien’s
risk of loss is not objectively consistent with the parties’ intention that he
be an independent contractor.
Conclusion
[36]
Considering the above
factors as a whole, I find that the parties’ intention that Mr. Therrien be an
independent contractor was supported by the objective evidence of his
relationship with Hastings Resort. Accordingly, Mr. Therrien’s appeal is dismissed.
Signed at Ottawa,
Canada, this 22nd day of April 2013.
“David E. Graham”
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