Benoit v. M.N.R., docket 97-330-UI

Date: 19980223

Docket: 97-330-UI

BETWEEN:

SOPHIE BENOIT,

Appellant,

and

THE MINISTER OF NATIONAL REVENUE,

Respondent,

and

GUAY, LABELLE & ASSOCIÉS INC.,

Intervener.

Reasons for Judgment

CHARRON D.J.T.C.C.

[1] This appeal was heard at Montréal, Quebec on January 7, 1998 to determine whether the appellant’s employment from May 8, 1995 to April 3, 1996 while she was employed by Guay, Labelle & Associés Inc. ("the payer") was insurable within the meaning of the Unemployment Insurance Act ("the Act").

[2] By letter dated December 11, 1996 the respondent informed the appellant that the employment was not insurable on the ground that it was not employment under a contract of service.

Statement of facts

[3] The facts on which the respondent relied in making his determination are set out in paragraph 5 of the Reply to the Notice of Appeal, as follows:

[TRANSLATION]

(a) the payer operated an executive search and evaluation business; (admitted)

(b) the company's shareholders were Michel Guay and Gaétan Labelle, who each held 50 percent of the shares; (admitted)

(c) the appellant was hired as an independent representative; (denied)

(d) the appellant had to find and develop clientele; (admitted)

(e) on May 8, 1995 the appellant signed a contract with the payer; (admitted)

(f) the appellant was paid by the payer on commission only; (denied)

(g) the contract provided for commission advances of $2,500 to the appellant monthly, which were loans from the payer; (denied as worded)

(h) the appellant had no schedule or quota of working hours to meet each week; (denied)

(i) the appellant paid the expenses of her automobile and meal and entertainment expenses and was not reimbursee by the payer; (denied)

(j) in her federal tax return the appellant claimed expenses for use of residence, telephone, depreciation, automobile and office; (admitted)

(k) the appellant could have worked for another payer, other than a competitor of the payer; (denied)

(l) the appellant was not entitled to vacation or sick leave from the payer; (denied)

(m) the appellant worked under a contract for services; (admitted)

(n) no contract of service existed between the appellant and the payer. (denied)

[4] The appellant admitted the truth of the facts alleged in the subparagraphs of paragraph 5 of the Reply to the Notice of Appeal, except those which she denied or said she had no knowledge of, as indicated in parentheses at the end of each subparagraph.

Testimony of Sophie Benoit

[5] The appellant, who was a human resources consultant, worked for Guay, Labelle & Associés Inc. during the aforementioned period of time. Her primary job was to find and develop clientele. By a contract under private seal dated May 8, 1995 it was agreed that she would have [TRANSLATION] "the status of independent sales representative serving the clientele of Guay, Labelle & Associés Inc. and any new clients added thereto. This agreement is subject to a three-month probation period and is for a period of one year, renewable annually" (Exhibit A-3).

[6] The appellant was paid by monthly advances of $2,500, each of which was deducted from the commissions earned. These [TRANSLATION] "advances are deemed to be loans made to the independent representative and are not to be regarded as salary, pay or any other form of compensation or remuneration". The advances were paid on the first of each month.

[7] A 20 percent commission was paid, calculated on sales made. The independent representative was responsible for paying her federal and provincial taxes.

[8] Any vacation taken was at the expense of the independent representative and arranged for less busy periods. The independent representative was responsible for travel costs.

[9] The appellant admitted that on March 21, 1996 she owed the payer $1,300, to be repaid out of fees billed by her to the payer. In the event that her employment terminated the appellant had to repay all the outstanding balance immediately (Exhibit A-1).

[10] In her federal tax return the appellant claimed expenses for the use of her house, telephone, office and car. She worked under a contract for services (subparagraph 5(m)).

[11] The appellant maintained that she was subject to a work schedule that she had to observe: 8:30 a.m. to 5:00 p.m., Monday to Friday. In the morning she made telephone calls and then carried out assignments. When a receptionist was on holiday she answered the telephone in her place, over lunch hour, without pay. When she had people take tests, she did it without pay. When she came in late, she was reproved for her not being punctual. This was the type of control exercised and the discipline that she had to observe. When she had to go out to find prospects and solicit clients one of the partners went with her; it was he who decided on the price and signed the contract and who determined what method would be used to do the work. Then, she had to fill out papers, write reports and take training. Sophie Benoit stated that she was forbidden to work for other employers. She did not have the right to choose the dates of her vacation. In practice she was under a contract of service with the payer. The advances she received from the payer were simply salary. Finally, she said she was not hired as an independent representative, just as a salaried employee. The appellant has a Master’s degree in industrial relations from the Université de Montréal. Before working for the payer, the appellant had worked for Standard Life.

[12] In 1995 Sophie Benoit filed an income tax return with Revenue Canada: she reported business income, not income from employment. She claimed meal and entertainment expenses ($2,416.50), automobile expenses ($1,589.05), office expenses ($275) and telephone expenses ($370) (Exhibit I-3).

[13] At the time she left the payer's business Sophie Benoit received $54.15 from the payer and the two parties exchanged a full and final release from any further mutual obligations (Exhibit I-1). During her working relationship with the payer the appellant always required that her work be paid for out of a [TRANSLATION] "professional fees" account (Exhibit I-4).

Testimony of Benoit Côté

[14] Côté is Sophie Benoit's husband. Prior to 1995 he attended the Université de Montréal and his wife drove him in the mornings, but after Sophie was hired by the payer she stopped doing it because she had to be at the payer's office for work at 8:30 a.m. and so she could no longer do it. Sophie worked five days a week, Monday to Friday. She finished work at 5:00 p.m. At noon he sometimes telephoned Sophie at the payer's office and it was she who answered the telephone.

Testimony of Michel Guay

[15] Michel Guay is one of the payer's two shareholders. Sophie Benoit applied for a job with the payer and was hired because of the information in her curriculum vitae (Exhibit INT-1). By her own request her status with the payer was as an independent representative, because she had worked on contract in other firms. She said she was quite familiar with her work. She started off slowly and did not meet the expectations the payer had of her. She required a lot of help in terms of training. The payer instructed Ms. Jubinville to help her put together her files, because she had a lot of difficulty, and gave her assignments so she could pay off her debt to the payer. On account of the additional assistance he had to give her he dropped her commission to 10 percent and on March 21, 1996 asked her to sign an acknowledgment of debt (Exhibit A-1).

[16] The job assigned to Sophie Benoit was to go on to the road and sell service contracts. After five months the appellant had not obtained enough contracts and her debt was still increasing. The plan devised to rescue her was not working. The parties settled their accounts, signed a full and final release (Exhibit I-1) and the appellant left the payer.

Analysis of facts in light of law

[17] It must now be determined whether the appellant's activity is included in the concept of insurable employment, that is whether there was a contract of service.

[18] The courts have developed four essential tests for determining whether there is a contract of service. The leading case in this area is City of Montreal v. Montreal Locomotive Works Ltd., [1947] 1 D.L.R. 161. These tests are the following: (1) control; (2) ownership of work tools; (3) chance of profit and risk of loss. (4) In Wiebe Door Services Ltd. v. M.N.R., the Federal Court of Appeal added the degree of integration, but this list is not exhaustive.

[19] The evidence showed that the work done by the appellant was not under the payer's direction and that there was no relationship of subordination between them. Under the contract entered into on May 8, 1995 the appellant was hired as an independent representative. The appellant herself admitted this, despite her many confused explanations attempting to show the contrary. Sophie Benoit was paid by a 20 percent commission on sales. In her federal tax return the appellant described her occupation as based on a contract for services. She paid for her own vacations and for her travel.

[20] The tools and premises she used to perform her duties were her own: she used her residence as an office and claimed part of the rent in her federal tax return; her telephone, car and computer were her working tools and she had no hesitation in claiming the cost of them in her tax return; she claimed her meals at restaurants as working expenses.

[21] The appellant put in for payment of her remuneration by sending accounts for professional fees to the payer. When she left, the appellant and the payer settled their accounts and exchanged a final release from any obligations.

[22] Sophie Benoit is now claiming status as an employee, despite the fact that she signed an agreement in which she was described as an independent representative (Exhibit A-3), and despite her admission in subparagraph 5(m) of the Reply to the Notice of Appeal, where it states that [TRANSLATION] "the appellant worked under a contract for services".

[23] The appellant's pay was directly proportional to her efforts: if she secured new and lucrative contracts, she earned a lot of money; if not, she earned very little. There was therefore a risk of loss, but also an opportunity to earn a lot.

[24] The burden of proof rests on the shoulders of the appellant. She must show on a balance of probabilities that there was in fact a contract of service between herself and the payer, but she has not done so. All the appellant's evidence turns on the credibility of the witnesses.

[25] The documentary evidence supported the payer's version and was not rebutted. The appellant's efforts only helped to sow confusion and contradiction in her testimony.

[26] The appeal is accordingly dismissed and the respondent's decision affirmed.

Signed at Ottawa, Canada, February 23, 1998.

G. Charron

D.J.T.C.C.

[OFFICIAL ENGLISH TRANSLATION]

Translation certified true on this 16th day of November 1998.

Kathryn Barnard, Revisor