Date: 20070130
Docket: A-469-05
Citation: 2007 FCA 60
CORAM
: LÉTOURNEAU J.A.
NADON
J.A.
PELLETIER
J.A.
BETWEEN:
COMBINED INSURANCE COMPANY OF AMERICA
Appellant
and
THE MINISTER OF NATIONAL REVENUE
and
MÉLANIE DRAPEAU
Respondents
REASONS FOR JUDGMENT
NADON J.A.
[1]
This is an
appeal from a decision by Mr. Justice McArthur of the Tax Court of Canada dated
September 6, 2005, affirming the decision of the Minister of National Revenue
(the Minister) dated September 20, 2004 that the respondent Mélanie Drapeau
(the respondent) held insurable employment with the appellant during the period
from August 18, 2003 to January 16, 2004 within the meaning of paragraph 5(1)(a)
of the Employment Insurance Act, S.C. 1996, c. C-23 (the Act).
[2]
The
appellant argued that the judge erred in finding that the respondent held
insurable employment. On the contrary, it submitted that, in view of the
evidence and in view of this Court’s earlier decisions the respondent was a
self-employed worker.
Facts
[3]
A brief
summary of the facts will assist in understanding the issue, namely whether the
judge erred in finding that the respondent was an employee of the appellant
rather than a self‑employed worker.
[4]
The
appellant is an insurance company; its line of business is to sell various
insurance policies throughout Canada, including life and health
insurance policies.
[5]
In July
2003 the respondent gave the appellant an undertaking to sell its insurance
policies and arrange for their service and renewal. In particular, she signed a
contract taking effect on July 14, 2003 entitled [TRANSLATION] “Combined
standard agency agreement” and undertook to [TRANSLATION] “sell [the
appellant’s] insurance contracts as an independent contractor”.
[6]
The
respondent signed a second contract, similar to the first, which came into
effect on January 1, 2004.
[7]
The
contracts signed by the respondent provided as follows:
1.
the
respondent, who states that she is an independent contractor, acknowledges
having no right to participate in any plans offered by the appellant to its
employees, and that the appellant shall not required to provide her with fringe
benefits; in addition, the respondent acknowledges that she is not an employee
within the meaning of the Labour Standards Act or the Quebec Labour
Code;
2.
the
respondent shall act for the appellant on a non-exclusive basis;
3.
the
appellant shall pay the respondent commissions consistent with and in an amount
corresponding to the appellant’s standard practices, in accordance with the
provisions set out in the appendices to the contracts signed by the respondent;
4.
the
respondent shall have complete latitude regarding her choice of persons from
whom she shall solicit insurance proposals, and the time, place and manner of
soliciting them, in accordance with a level and with standards of quality at
least equal to the standards and practices generally recognized for such
services in Canada;
5.
the
respondent shall at all times at her own expense maintain in effect an
appropriate insurance policy covering her personal civil liability;
6.
the
respondent shall at her own expense have an insurance with the appellant against
embezzlement.
[8]
The
respondent was recruited by Jean-Guy Saint-Laurent through an advertisement
placed in the Granby newspaper La voix de l’est
seeking to recruit new sales representatives for the appellant’s products, in
particular accident insurance and health insurance policies. At that time
Mr. Saint-Laurent held the position of district manager and was himself
working for the appellant as an independent representative and contractor. I
emphasize the fact that the cost of the advertisement was paid for by Mr.
Saint-Laurent, not by the appellant.
[9]
Mr.
Saint-Laurent’s duty, with the assistance of his sales manager Sylvain Poulin,
was inter alia to train new representatives, such as the respondent, in
the field of insurance. This training followed the eight-day training given to
new representatives by the appellant for the obtention of their insurance
permit. The appellant also offered two further weeks of training on products,
sales technique, sales manuals, administration and ethics in the field of insurance.
The training offered by the appellant took place at its offices in Boucherville, Quebec.
[10]
The
training given by Mr. Saint-Laurent consisted of a required period of
15 weeks pursuant to the Act Respecting the Distribution of Financial
Products and Services, R.S.Q. c. D-9.1. During that time, the new
representatives were invited inter alia to participate in morning
meetings known as “pep meetings” and lunch meetings, the purpose of which was
to motivate them and to give them advice enabling them to improve the quality
and effectiveness of their services to the appellant’s customers.
[11]
In the
course of this training, there was of course “on-the-job” training, in which
Mr. Saint-Laurent or Mr. Poulin could accompany the new representative. In
particular, during the first week of training Mr. Poulin accompanied the new
representative. Subsequently, from the second to the seventh week, Mr. Poulin
or Mr. Saint-Laurent accompanied the new representative two days a week.
Finally, from the eighth to the fifteenth week, Mr. Saint-Laurent or Mr. Poulin
accompanied the new representative one day a week.
[12]
Acting as
the respondent’s training supervisor, Mr. Saint-Laurent had to supervise all of
her activities in the course of her training. As the new representative’s
liability insurance only came into effect at the end of her training period,
that is at the time the Autorité des marchés financiers issued her a licence to
sell insurance, the respondent’s liability was at that time covered by Mr.
Saint-Laurent’s liability insurance.
[13]
It should
be noted that the respondent was part of Mr. Saint-Laurent’s sales team,
consisting of a sales manager and four to five representatives. Nevertheless,
the respondent had no contractual relationship with Mr. Saint-Laurent, each of them
being under contract with the appellant to sell its insurance products as
independent contractors. I also note the fact that in connection with sales
made by his sales team, including the respondent, Mr. Saint-Laurent was
entitled under his contractual agreement with the appellant to receive a
percentage of the premiums generated by the sale of new policies by members of
his team.
[14]
The
appellant did not make any office space available to its representatives, as
the latter had to meet their customers at home, at their workplace or at any
other location agreed upon with them. It also provided no phone service or
stationery. All operating costs had to be borne by the representatives. At the
same time, I would note that Mr. Saint-Laurent leased premises in Granby for which he paid the lease
and all expenses. This was where inter alia the morning “pep meetings”
were held.
[15]
In
addition, representatives had to bear the cost of any promotional material
given to them by the appellant, including presentation portfolios, sales
manuals and business cards. The representatives had to use their own cars and
assume all the relevant costs, including fuel costs.
[16]
As
stipulated in the contracts signed by the respondent, she was free to sell
policies other than those of the appellant and she could be substituted for by
other representatives for the performance of her duties so long as the
representatives were under contract with the appellant.
[17]
For her
2003 taxation year the respondent stated she was a self-employed worker, and
therefore deducted relevant expenses from her income.
[18]
In the
course of her testimony the respondent acknowledged that she knew that an
employee could not deduct expenses. She also testified that when she claimed
employment insurance in April 2004 she did not know that a self-employed worker
was not entitled to it.
Applicable legislation
[19]
Articles
2085, 2098 and 2099 of the Civil Code of Quebec, S.Q. 1991, c. 64, are
applicable and I set them out below:
|
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.
. . . . .
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
carry out physical or intellectual work for another person, the client or to
provide a service, for a price which the client binds himself to pay.
2099.
The contractor or the provider of services is free to choose the means of
performing the contract and no relationship of subordination exists between
the contractor or the provider of services and the client in respect of such
performance.
|
2085.
Le contrat de travail est celui par lequel une personne, le salarié,
s’oblige, pour un temps limité et moyennant rémunération, à effectuer un
travail sous la direction ou le contrôle d’une autre personne, l’employeur.
. . . . .
2098.
Le contrat d’entreprise ou de service est celui par lequel une personne,
selon le cas l’entrepreneur ou le prestataire de services, s’engage envers
une autre personne, le client, à réaliser un ouvrage matériel ou intellectuel
ou à fournir un service moyennant un prix que le client s’oblige à lui payer.
2099.
L’entrepreneur ou le prestataire de services a le libre choix des moyens
d’exécution du contrat et il n’existe entre lui et le client aucun lien de
subordination quant à son exécution.
|
Tax Court of Canada decision
[20]
Mr.
Justice McArthur found that the respondent was an employee of the appellant and
consequently held insurable employment. In his opinion the degree of control
exercised by the appellant was such that a relationship of subordination
existed between the respondent and the appellant, and that sufficed to
establish the existence of a contract of employment.
[21]
In view,
on one hand, of articles 2085, 2098 and 2099 of the Civil Code of Quebec,
defining the contract of employment and the contract for services, and, on the
other hand, of the decision of his colleague Judge Dussault in Lévesque v.
Canada (Department of National Revenue), 2005 TCJ No. 183, in which the
presence or absence of a relationship of subordination between the parties was
determinative, it was held that there was no need, apart from the test of
control, to adopt the tests stated by this Court in Wiebe Door Services Ltd.
v. M.N.R., [1986] 3 F.C. 553, namely ownership of the work tools, chance of
profit and risk of loss and integration, and accepted by the Supreme Court of
Canada in 671122 Ontario Ltd. v. Sagaz Industries Canada Inc., [2001] 2
S.C.R. 983.
[22]
Therefore,
the judge approved the following tests set out by Judge Dussault at
paragraph 25 of his reasons in Levesque, supra, to determine
the existence of a relationship of subordination between the parties:
compulsory attendance at a workplace, compliance with a work schedule,
supervision of employee vacation absences, submission of activity reports,
supervision of quantity and quality of work, imposition of work methods, power
to penalize employee performance, source deductions, fringe benefits, status of
employee in tax returns and exclusivity of services for the employer.
[23]
The judge
went on to apply the tests to the facts of the case and found that a
relationship of subordination existed. At paragraphs 26 to 28 of his reasons,
he found as follows:
26. In the light of the indicia listed above, I find that by virtue of the
degree of control involved in the relationship between the appellant and the
intervener, that relationship was sufficiently subordinate to constitute an
employment contract rather than a contract of enterprise.
27. However, the
appellant's business model is not on trial in the case at bar. It is quite
possible that most of the appellant's representatives are independent
contractors. It is even possible that Mr. Saint-Laurent, who had
considerable discretion regarding the way in which he managed representatives,
did not exercise the same degree of control over the work of other
representatives under his supervision.
28. Nonetheless, it is clear to me that the intervener, having been subject to
the control that the appellant exercised over her during her period of service, experienced
all the drawbacks of employee status without access to its benefits, including
eligibility for employment insurance benefits.
Case law
[24]
In Wolf
v. Canada (C.A.), [2002] 4 F.C. 396, where the contract between
Mr. Wolf and Canadair Limited was governed by Quebec law, this Court considered
the tests for determining whether the contract was one of employment or for
services.
[25]
In that
case Madam Justice Desjardins stated that in her opinion this determination
could be made on the basis of the tests developed by the case law, both in the
civil and common law jurisdictions. Therefore, she examined the relationship
between the parties in the light of the tests set out by this Court in Wiebe
Door, supra, as reformulated by the Supreme Court in Sagaz, supra.
In particular, Madam Justice Desjardins relied on the comments of Mr. Justice
Major who wrote at paragraphs 47 and 48 of his reasons in Sagaz:
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.]
[26]
In
particular, at paragraph 72 of her reasons, Madam Justice Desjardins stated
that the Court had to consider all the evidence in the light of the applicable
tests and give the evidence the weight required in the circumstances of the
case. In addition, she noted that the parties’ intention should be considered
whenever it reflected their real legal relationship.
[27]
Mr.
Justice Décary, who concurred with Madam Justice Desjardins as to the finding
that Mr. Wolf’s contract was a contract for services, differed in his
reasoning. In his view, provided the parties signed a contract for services in
good faith and the contract was carried out “as such”, the parties’ intention
was clear and no further consideration of the matter was required.
[28]
In
subsequent decisions, this Court has reiterated the importance to be given to
the parties’ intent, as a contract represents the will of the parties to the
contract: see D & J Driveway v. The Minister of National Revenue,
2003 FCA 453, Poulin v. The Minister of National Revenue, 2003 FCA 50.
In Le Livreur Plus Inc. v. Canada, F.C.J. No. 267, at paragraph 17, Mr.
Justice Létourneau wrote for the Court:
17. What the
parties stipulate as to the nature of their contractual relations is not
necessarily conclusive, and the Court may arrive at a different conclusion
based on the evidence before it: D&J Driveway Inc. v. The
Minister of National Revenue, 2003 FCA 453. However, if there is no
unambiguous evidence to the contrary, the Court should duly take the parties'
stated intention into account: Mayne Nickless Transport Inc. v. The
Minister of National Revenue, 97-1416-UI, February 26, 1999
(T.C.C.). Essentially, the question is as to the true nature of the
relations between the parties. Thus, their sincerely expressed intention is
still an important point to consider in determining the actual overall
relationship the parties have had between themselves in a constantly changing
working world: see Wolf v. Canada, [2002] 4 F.C. 396
(F.C.A.); Attorney General of Canada v. Les Productions Bibi et Zoé Inc.,
2004 FCA 54.
[Emphasis
added.]
[29]
More
recently, in Royal Winnipeg Ballet v. Canada (M.N.R.), 2006 FCA 87,
March 2, 2006, this Court had to determine whether three dancers
hired by the Royal Winnipeg Ballet (RWB) were employees or independent
contractors. A majority of the Court (Mr. Justice Evans dissenting) found that
the dancers were not RWB employees.
[30]
After
having noted that the dancers and RWB agreed on the fact that the dancers were
independent contractors, Madam Justice Sharlow said that in her opinion the Tax
Court of Canada judge had to consider the tests set out in Wiebe Door, supra,
in accordance with the understanding the parties had of the nature of their
relationship, in order to determine whether that understanding was consistent
with the way in which they had “performed” their contract.
[31]
As Madam
Justice Sharlow observed, since the judge had erred by not taking this approach
it became necessary for the Court to consider the relationship of the parties
in the light of the factors set out in Wiebe Door, supra. This review
led her to hold that “the common understanding of the parties as to the nature
of their legal relationship is borne out by the contractual terms and the other
relevant facts” (paragraph 67 of the reasons).
[32]
Further,
although Madam Justice Sharlow was of the view that as in most cases the
control test required special attention, she nevertheless found that the
control exercised by the RWB over its dancers was not inconsistent with the
parties’ intention to regard them as independent contractors. At paragraph 66
of her reasons she said:
[66] The control
factor in this case, as in most cases, requires particular attention. It seems
to me that while the degree of control exercised by the RWB over the work of
the dancers is extensive, it is no more than is needed to stage a series of
ballets over a well planned season of performances. If the RWB were to
stage a ballet using guest artists in all principal roles, the RWB’s control
over the guest artists would be the same as if each role were performed by a
dancer engaged for the season. If it is accepted (as it must be), that a guest
artist may accept a role with the RWB without becoming its employee, then the
element of control must be consistent with the guest artist being an
independent contractor. Therefore, the elements of control in this case
cannot reasonably be considered to be inconsistent with the parties’
understanding that the dancers were independent contractors.
[Emphasis
added.]
[33]
Madam Justice
Desjardins, concurring in the reasons of Madam Justice Sharlow, reiterated the
principle that the judge should ensure that the classification given to the
contract by the parties was consistent with the actual state of affairs. At
paragraphs 79 and 80 of her concurring reasons, Madam Justice Desjardins wrote
the following:
[79] In the case
at bar, it is the nature of the contract which must be determined, through an
analysis of its terms in the light of the fourfold test, namely the level of
control, the ownership of the equipment, the degree of financial risk and the
opportunity for profit.
[80] Given the
above case law, I see no compelling reason why the common law judge, who
embarks on the difficult task of determining whether a contract is one of
service or for service, should be deprived of the possibility of
adverting to as many criteria and indicia as may reasonably be recognized in
order to assess the true nature of the relationship governing the parties.
[34]
To
conclude this review of the applicable case law, I refer to the comments made
by Mr. Justice Létourneau in Le Livreur Plus Inc. v. Canada, supra.
After having determined that the question on which the Court had to rule was
always that of the true nature of the relationship between the parties, Mr.
Justice Létourneau stated at paragraph 18 of his reasons, regarding the
relevance of the test in Wiebe Door, supra:
[18] In these
circumstances, the tests mentioned in Wiebe Door Services Ltd. v. M.N.R.,
87 D.T.C. 5025, namely the degree of control, ownership of the work tools,
the chance of profit and risk of loss, and finally integration, are only
points of reference: Charbonneau v. Canada (Minister of
National Revenue - M.N.R.) (1996), 207 N.R. 299, paragraph 3. Where a
real contract exists, the Court must determine whether there is between the
parties a relationship of subordination which is characteristic of a contract
of employment, or whether there is instead a degree of independence which
indicates a contract of enterprise: ibid.
[Emphasis
added.]
[35]
In my
view, the following principles emerge from these decisions:
1.
The
relevant facts, including the parties’ intent regarding the nature of their
contractual relationship, must be looked at in the light of the factors in Wiebe
Door, supra, and in the light of any factor which may prove to be relevant
in the particular circumstances of the case;
2.
There is
no predetermined way of applying the relevant factors and their importance will
depend on the circumstances and the particular facts of the case.
Although as a general rule the control test is of special
importance, the tests developed in Wiebe Door and Sagaz, supra,
will nevertheless be useful in determining the real nature of the contract.
Analysis
[36]
For the
reasons that follow, I find that the respondent was a self-employed worker and
therefore, did not hold insurable employment with the appellant.
[37]
The judge
had conflicting evidence before him. On the one hand, he had the respondent’s
testimony, on which he relied in finding that she held insurable employment
with the appellant. On the other hand, he had the testimony of two of the
appellant’s employees, Michel Rivest and Stéphane Fortin, at the relevant time respectively
director of training and trainer, as well as that of Yves Crevier, a
self-employed worker-representative, and Jean-Guy Saint-Laurent, the district
manager and the respondent’s supervisor during her training period.
[38]
After
having carefully read the reasons of Mr. Justice McArthur, I have no doubt that
he did not consider the testimony of Messrs. Rivest, Fortin, Crevier and
Saint-Laurent. As he made no finding as to the credibility of the witnesses,
the judge had to consider all the evidence before making a finding as to the
relationship between the parties. With all due respect for Mr. Justice
McArthur, it is clear that he based his conclusions solely on the respondent’s
testimony, and this was an error. Further, it is beyond question that the judge
did not in any way consider the tests developed by this Court in Wiebe Door,
supra, which are, as Mr. Justice Létourneau stated in Le Livreur Plus,
supra, at the very least useful guidelines in determining whether a
contract is one of employment or for services.
[39]
In view of
this finding, it becomes necessary for this Court to examine anew the evidence
in this case in the light of the applicable tests.
A. Ownership of work tools
[40]
On this
point the evidence is clear: the respondent was the owner of all the work tools
she needed to carry out her duties as the appellant’s representative. According
to the agreements she had concluded with the appellant, the respondent had to
bear the cost of her licence to practise as an insurer and the liability
insurance policy she had to take out. In addition, she needed a vehicle and she
bore all the relevant costs.
[41]
The
appellant provided her with no office space and the respondent had to meet her
customers at a location agreed upon between them. She also had to use her own
stationery to fill the documentation required by the appellant. Although the
sales equipment and business cards were prepared by the appellant on account of
statutory and regulatory requirements regarding the sale of insurance, the
respondent had to bear all or at least a significant part of the cost of this
material.
B. Chance of profit and risk of
loss
[42]
As appears
from the contracts signed by the respondent, she was entitled to receive
payment of commissions on policies which she sold and renewed. The evidence
showed that the commissions were larger in the case of a new policy than in the
case of a renewed policy. It is thus clear that the respondent’s income largely
depended on her success in selling new insurance policies. Therefore, in order
to succeed, the respondent had to solicit new customers and persuade them that
it was in their interests to take out a health or sickness insurance policy
with the appellant.
[43]
It is
clear from the testimony of Messrs. Rivest, Crevier and Saint-Laurent that a
representative’s income was entirely dependent on the hours of work he or she
put into selling insurance policies. In addition, though the evidence was that
Mr. Saint-Laurent had personally guaranteed the respondent’s minimum commission
of $400 weekly for her first eight weeks of work, the appellant paid its
representatives no salary.
[44]
Since the
respondent had to incur a great deal of expenses in order to earn her
commissions, regardless of the success which she had in selling insurance
policies, I am of the view that the respondent incurred all the risks of loss
if she did not manage to sell a large enough number of new policies.
C. Integration
[45]
Since the
respondent worked as a representative of the appellant for only a short period
of time (August 18, 2003 to January 16, 2004), the evidence clearly could not
indicate to what extent she had developed her clientele so that it would
constitute a business.
[46]
In
addition, it is worth noting the testimony of Mr. Crevier, a self‑employed
worker‑representative like the respondent, that after a difficult
beginning he was able to develop and maintain an extensive clientele as a
result of which he received a significant amount of commissions annually. Mr.
Crevier testified (page 205 of transcript) that he received approximately
$2,700 a month [TRANSLATION] “before starting work”, this amount representing
commissions on insurance policies renewed each month. As to his income, Mr.
Crevier explained that, of course, he had to cover all the expenses incurred in
earning the income such as meals, fuel, maintenance of his vehicle, cellular
telephone, stationery and so on.
[47]
Finally,
according to the testimony of Messrs. Rivest, Crevier and Saint-Laurent, a
representative of the appellant like the respondent was not required to work exclusively
for the appellant, and therefore, could sell other insurance products than
those of the appellant. Further, Mr. Rivest, now the appellant’s division
manager, testified that although his representatives could sell insurance
policies for other insurance companies he did not encourage them to do so
[TRANSLATION] “just for financial reasons” (page 179 of transcript).
[48]
I
therefore find that the respondent’s activities were not integrated with those
of the appellant, in particular because her contract stipulated that she was
not an exclusive representative of the appellant, that she could accordingly
sell the products of other companies, and further, provided that she complied
with statutory and regulatory requirements, she could be replaced by other representatives.
[49]
I conclude
on this point by noting that once she had obtained her insurer’s licence the
respondent could undoubtedly sell the insurance products of any insurer
provided she was able to conclude an agreement with that insurer.
D. Degree of control
[50]
As I
mentioned earlier, the contracts signed by the respondent provided that she
would act for the appellant as a self-employed worker and would have complete
latitude in choosing the persons from whom she would solicit insurance
proposals, as well as the times, locations and ways in which she would make
such solicitations. Despite the fact that the respondent testified that she
signed these contracts without reading them, it is clear from the testimony of
Messrs. Fortin and Rivest that the terms of the contracts were explained to her
before she signed them.
[51]
Although
her contracts with the appellant expressly stipulated that she would act as an
independent worker, the respondent maintained that this was not the actual
state of affairs. After having carefully read all the testimony, there can be
no doubt in my view that the respondent’s argument is based on her relationship
with her district manager, Jean-Guy Saint-Laurent. In her testimony, the
respondent told the Court that she [TRANSLATION] “was basically afraid of him”
(page 50 of the transcript).
[52]
Before
considering the specific reasons why the respondent argued that she was an
employee and not a self-employed worker, it is worth noting there was no
contractual relationship between the respondent and Mr. Saint-Laurent. Indeed,
like the respondent, he had signed a contract with the appellant undertaking to
work for it as a self-employed worker. Neither the respondent nor the Minister
disputed Mr. Saint-Laurent’s status. It is also worth noting again that since
Mr. Saint‑Laurent was entitled to receive a percentage of the
premiums generated by sales made by the respondent he had a definite interest
in the respondent’s being able to sell as large a number of insurance policies
as possible.
[53]
The
respondent argued that she was an employee because she was required daily to
attend a morning meeting and a lunch meeting with Mr. Saint-Laurent and other
representatives, she had to report to Mr. Saint-Laurent at the end of each day
to inform him about her sales, she had to follow a work schedule (8 a.m. to 9
p.m.), she had to cover territory decided on in advance by
Mr. Saint-Laurent, and finally, she was subject to penalties if she did
not carry out Mr. Saint‑Laurent’s instructions.
[54]
In my
view, the evidence provided no support for the respondent’s argument.
E. Required presence at
workplace and observance of work schedule
[55]
According
to the respondent, she had without fail to meet with Mr. Saint-Laurent and
other representatives every morning and during the lunch hour to discuss their
sales techniques and receive maps regarding renewal of the appellant’s
policies. In addition, she testified she had to work from 8 a.m. to 9 p.m..
[56]
At the
same time, she admitted that, except for her training period, neither her district
manager nor her sales manager could really check her use of her time, since it
was up to her to set meetings with customers and to attend those meetings.
Therefore, Mr. Saint-Laurent did not know all her comings and goings. During
her testimony the respondent even admitted that occasionally she did not tell
Mr. Saint-Laurent the truth regarding the use of her time.
[57]
At the
same time, Messrs. Rivest, Crevier and Saint-Laurent testified that there was
no need to impose or dictate a fixed schedule for representatives, since it was
impossible for them to build up clientele unless they worked long hours every
day. In particular, according to Mr. Rivest, the appellant did not impose
a fixed schedule or a minimum number of hours on its representatives. As to the
morning “pep meetings”, he pointed that they were not in any way compulsory and
no penalties were imposed on representatives who did not attend the meetings.
[58]
Mr.
Crevier, also a representative of the appellant, further testified that no work
schedule was imposed on representatives since, in his view, it would have been
impossible to exercise such control. Mr. Crevier had worked with various
district managers, including Mr. Saint‑Laurent, during his career
and testified that he had derived great benefits from attending the morning and
lunchtime meetings, especially at the start of his career, since he had been
able to develop his sales techniques from the experience of other
representatives. He also testified he had never considered such meetings as compulsory.
He further testified that he had never thought that penalties could be applied
for failing to attend meetings, but he nevertheless would notify his district
manager when he was unable to attend, simply out of respect and courtesy for
those attending the meetings.
[59]
Mr.
Saint-Laurent testified that the meetings were not compulsory but it was
beneficial for a new representative to attend them so as to have the advantage
of the experience of other representatives. Mr. Saint-Laurent also admitted
that he was entitled to a percentage of the premiums generated by his
representatives’ sales, and he thus had a great interest in ensuring that they
were fully motivated to sell policies.
F. Control of absences for
vacation
[60]
The
respondent testified that she had taken no vacation during the period in
question, but had taken several days’ leave on account of a difficult
pregnancy, adding that she had to justify her absences to Mr. Saint-Laurent or
Mr. Poulin, with supporting documentation.
[61]
Mr.
Crevier testified, as he did in the case of absences from daily meetings, that
no penalty was applied when he took vacations, but he always made sure to
notify his district manager in due time that he would not be available for a
certain period. In Mr. Crevier’s submission, no approval was necessary for him
to take his vacations.
G. Penalties
[62]
The
respondent was unable to tell the Court what penalties could be imposed on her
by Mr. Saint-Laurent if she did not meet his requirements. In particular, she
admitted that despite the fact Mr. Saint-Laurent had told her he might send her
to another team if her performance was not satisfactory, he had never
threatened to terminate her contract.
H. Imposition of work methods
[63]
The
respondent testified that Mr. Saint-Laurent required that her work be done in
accordance with specific instructions; in particular, she had to use certain
approved phrases when meeting customers. In this regard, she added that during
her period of training with the appellant, the latter provided her with material
containing information on sales techniques developed by the appellant and Mr.
Saint-Laurent insisted on her using those techniques when he accompanied her.
At the same time, she admitted that since Mr. Saint-Laurent did not accompany
her regularly he could not verify whether she was using the techniques. She
further admitted that, when she was accompanied by Mr. Poulin, her sales
manager, he did not require that the appellant’s sales techniques be used.
[64]
Mr. Rivest
explained to the Court that, owing to the strict regulatory control of the
field of insurance, the appellant had to ensure that its representatives
complied with the requirements of the Act and Regulations in all respects. This
is why the appellant gave its representatives complete training and provided
them with detailed sales material which could be used by them when meeting
customers. He also explained that by the compulsory 45-day training period,
followed by a period of 30 days in which representatives were to be supervised
while waiting for their insurer’s licence to be issued, the appellant had to
ensure that its representatives complied with the Act and Regulations.
[65]
Mr. Rivest
further testified that the appellant had developed sales techniques considered
to be effective and made these techniques available to its representatives. At
the same time, he added that since the appellant had no direct contact with its
representatives it in fact had no means of verifying whether the techniques
were actually being used by the representatives. In his opinion, the
representatives were not required to necessarily adopt these techniques. On
these points, Messrs. Crevier and Saint-Laurent agreed with Mr. Rivest’s view.
I. Submission of activity
reports
[66]
All the
witnesses agreed that the respondent had to file a weekly written report
listing renewed and new insurance policies. The respondent could not receive
her commissions without submitting such a report, since the commissions were
paid by the appellant to its representatives on the basis of these reports.
J. Control of quantity and
quality of work
[67]
The
respondent testified that the appellant set no base objectives, but that she
set weekly objectives herself and informed Mr. Saint-Laurent of them. She
testified that if he was not satisfied with her performance Mr. Saint-Laurent
could penalize her by assigning maps for policy renewal in a less productive
geographic sector.
[68]
As to the
customers she could solicit, the respondent testified that each week she
received renewal maps from Mr. Saint-Laurent relating to customers located in a
specific geographic sector. Therefore, she was limited to meeting customers in
the sector assigned to her by Mr. Saint-Laurent. In her submission, she could
not solicit customers outside that sector, except for family members or friends.
[69]
On this
point, Mr. Rivest explained to the Court that for reasons of efficiency it was
usual to arrange for representatives to limit their visits to certain specific
sectors, but that the appellant did not make any attempt to prevent its
representatives developing their clientele outside the sectors assigned to
them. He further testified that the appellant advised its representatives not
to solicit their families, in view of the possibilities of conflicts of
interest, but apart from such considerations no limits were imposed on them as
to who might be solicited. This testimony was consistent with that of Messrs.
Crevier and Saint-Laurent, who considered that it was more efficient for
representatives not to solicit customers in sectors covered by other
representatives, and as a matter of courtesy representatives respected this
arrangement.
[70]
The judge
also referred to the control of the respondent’s work quality in support of his
finding that the appellant exercised control over the respondent. At paragraph
19 of his decision, he wrote “it is the degree of control exercised over the
quality of work that counts”. This was an error of law, as this Court’s case
law is consistent on this point: control of the quality of work, like that of
results, does not necessarily create a relationship of subordination. They also
should not be confused with control of the performance of work: see Desbiens
v. Attorney General of Canada, 2005 FCA 439, at paragraph 6.
Conclusions
[71]
In my
view, the classification given by the appellant and the respondent to their
contractual relationship reflects the actual state of affairs. In other words,
the actual state of affairs reflects the respondent’s undertaking, as set out
in the contracts, to sell the appellant’s policies as an independent
contractor. After a careful review of the evidence, I cannot, with all due
respect for the judge, find that a relationship of subordination existed as to
performance of the work which the respondent had to do for the appellant.
[72]
First, I
am satisfied that the tests in Wiebe Door, supra, support the
appellant’s argument, namely that the respondent was a self-employed worker. It
appeared from the evidence that the respondent was the owner of the tools
required to pursue her activities, that the perspectives of profit and risk of
loss depended on the work put in by the respondent and that it is likely that
if the respondent had worked as a representative for the appellant for a longer
time she could have developed a significant number of customers. Therefore, it
is warranted to find that during the period from August 2003 to January 2004
the respondent was working on developing her own business. Finally, the
evidence was that the appellant exercised only a limited amount of control over
the results of the respondent’s work, primarily to ensure compliance with
statutory and regulatory requirements.
[73]
Secondly,
I cannot agree with the Minister’s contention that Mr. Saint-Laurent exercised
such a degree of control over the respondent as to create a relationship of
subordination in the performance of her work. In my view, Mr. Saint-Laurent did
not exercise over the respondent the control necessary to support a conclusion
that a contract of employment existed. Rather, I find that, in view of his
financial interest in the respondent selling as large a number of insurance
policies as possible, Mr. Saint-Laurent did everything he could to motivate his
representatives and make them more efficient. There can be no doubt that Mr.
Saint-Laurent exerted considerable pressure on the respondent to encourage her
to sell the appellant’s policies.
[74]
Nevertheless,
it appears that Mr. Saint-Laurent’s directives were not binding on the
respondent and that she was not required to follow them. Although Mr.
Saint-Laurent had an interest in new representatives attending meetings and
increasing their productivity on account of the percentages he received on
their sales, there is no indication that he exercised any control over them
through the application of penalties.
[75]
Thirdly,
the fact that in her 2003 taxation year the respondent was regarded as a self‑employed
worker and at that time deducted from her income the expenses she had incurred
is in my view indicative of her understanding of the contracts she had
concluded with the appellant.
[76]
I
accordingly find that the respondent did not hold insurable employment with the
appellant during the period from August 18, 2003 to January 16, 2004.
Decision
[77]
For
these reasons, I would allow the appeal with costs and set aside the decision
by the Tax Court of Canada. Rendering the judgment which the Tax Court of
Canada should have rendered, I would allow the appellant’s appeal with costs
and, as authorized by subsection 103(3) of the Employment Insurance Act,
S.C. c. 23, I would vary the Minister’s decision to find that the respondent
Mélanie Drapeau was not an employee of the appellant for the period from
August 18, 2003 to January 16, 2004.
“M.
Nadon”
I
concur.
Gilles
Létourneau J.A.
I
concur.
J.D.
Denis Pelletier J.A.
Certified
true translation
François
Brunet, LL.B., B.C.L.
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