Citation: 2009 TCC 84
Date: 20090204
Docket: 2008-105(EI)
BETWEEN:
NORMAND VACHON,
Appellant,
and
THE MINISTER OF NATIONAL REVENUE,
Respondent,
and
LES PRODUITS MÉTALLIQUES ROY INC.,
Intervener.
[OFFICIAL ENGLISH
TRANSLATION]
REASONS FOR JUDGMENT
Favreau J.
[1]
Normand Roy (the Worker)
is appealing from a decision by the Minister of National Revenue (the Minister)
respecting the insurability of the work performed with Les produits métalliques
Roy Inc. (the Payor) for the period from June 10, 2002, to December 31,
2004 (the relevant period). The Minister determined that the Worker was
employed in insurable employment for the purposes of the Employment
Insurance Act (the Act). The Worker submits that he was not employed in such
employment as the nature of the contractual relationship binding them to the
Payor was not that of a contract of employment, but rather that of a contract
for services.
[2]
In making his decision,
the Minister determined, based on the following assumptions of fact set out at
paragraph 12 of the Reply to the Notice of Appeal, that the Appellant was employed
under a contract of service:
[TRANSLATION]
(a) The Payor was incorporated on November 28, 1999;
(no knowledge)
(b) The Payor operates a commercial furniture
manufacturing business; (admitted)
(c) The Payor has annual sales of over 23 million dollars
and employs over 200 employees; (denied with respect to what is inconsistent
with the Payor’s financial statements)
(d) The Payor’s principal shareholder was the Groupe
Robert Roy Inc., a management business whose majority shareholder was Robert Roy;
(denied with respect to what is inconsistent with the Payor’s minutes book)
(e) Robert Roy was also the president and director
of the Payor; (admitted)
(f) In 2002, the Payor mandated Gestion Michel
Aubry Inc. to perform a diagnostic test on the Payor’s operations; (admitted)
(g) The report of Gestion Michel Aubry Inc.
recommended, inter alia, that the Payor hire an acting chief executive
officer on a full-time basis; (admitted as long as the term “hire” is
interpreted as being hired as a self-employed worker)
(h) Following that recommendation, the Payor hired
the Worker as acting chief executive officer; (denied as written as the Worker was
self-employed)
(i) The Worker had extensive experience as chief executive officer of companies such as
Alcan, Bombardier and Volvo; (admitted)
(j) The Payor and the Worker signed a first employment
agreement on June 10, 2002, covering the period from July 29,
2002, to January 31, 2003, and a second agreement covering the period from
February 3 to November 28, 2003; this last agreement was extended until December
2004; (admitted with respect to the agreements, but denied as to the use of the
expression “employment agreement”)
(k) The Payor and the Worker agreed in writing to
the terms and conditions of service of the Worker that came within the purview
of the Payor’s board of directors; (admitted as long as it means how to report
to the Payor as a consultant agent)
(l) The Worker’s main objective consisted in making
the Payor profitable again and assisting Robert Roy in managing operations;
(admitted)
(m) The Worker had an office at the Payor’s premises and
also used the Payor’s boardroom; (admitted by specifying that the premises were
placed at his disposal only for the duration of his mandate and that the
boardroom was only used once per week at most)
(n) The Payor confirms that the Worker performed 95%
of his duties at its premises; (no knowledge)
(o) Generally speaking, the Worker worked 4 days
per week at the Payor’s premises in addition to occasionally working in the
evening, from his hotel room, on certain matters; (denied as written by
specifying that he generally worked 3½ days per weeks)
(p) During his mandate with the Payor, the Worker
carried out several tasks, including the following:
a.
he coached Robert Roy so that he could gain experience
as a chief executive officer; (denied as written as the objective was not for Mr. Roy
to become chief executive officer)
b.
he rectified issues involving the quality
control of finished products and applied a new for reducing production time and
errors; (admitted)
c.
he mobilized, with the help of executives, staff
by way of an action plan, consensus and planned implementation with a view to
increasing production speed and quality; (admitted)
d.
he put in place des corrective measures so that would
allow certain employees of the Payor to receive complaints from dissatisfied customers;
(admitted)
e.
he submitted reports on the fiscal results and
provided outcome measures during quarterly meetings with the board of directors;
(admitted)
f.
he held meetings with six other executives of
the Payor who, as a management committee, ensured the implementation of the
corrective measures he suggested; (admitted)
(q) The Worker was paid a fixed salary of $1,200.00 per
day and was reimbursed for his travel, meal and lodging expenses; (admitted by
adding that he charged GST and QST on the monthly invoices he submitted to the
Payor)
(r) The Worker was paid upon the submission of
invoices which indicate that, during the period in issue, he worked between 20
and 23 days per month for the Payor; (denied as written with respect to
anything that is inconsistent with the invoices issued)
(s) The Worker did not incur any financial risk in
performing his work for the Payor; (denied)
(t) The worker was the acting chief executive
officer, that is to say, he occupied a line position in the Payor’s business
which is an indication of the integration into the
business and an indication of subordination; (denied)
(u) The monthly invoices obtained from the Payor confirm
that the Worker’s benefit period began on June 10, 2002; (no knowledge)
(v) During the period in issue, the Worker rendered services under
the
supervision and control of the payor. (denied)
[3]
Normand Vachon and Roger Dufresne,
appeals officer, both testified. No one testified on behalf of the Payor. The
Worker indicated that he had 35 years’ experience as a chief executive
officer, namely with Alcan, Bombardier and Volvo. After leaving Volvo, he took
a one-year sabbatical and began to provide business start-up and turnaround
consulting services. Prior to the relevant period, he performed consulting
mandates for Bombardier and Ébénisterie Saint‑Patrick.
[4]
In all, the Worker
entered into four agreements with the Payor. The first agreement is dated June
10, 2002, and its main terms and conditions are as follows:
[TRANSLATION]
-
Les produits
métalliques Roy Inc. retains the services of Mr. Vachon who will act as
Acting Chief Executive Officer for the period July 29, 2002, to January 31, 2003;
-
the mandate will be
performed on a full-time basis, that is, from Monday to Friday, inclusively;
-
a transition period
will be mutually defined by the parties to effectively ensure the transfer of
responsibilities to Mr. Vachon’s successor at Ébénisterie Saint‑Patrick;
-
Mr. Vachon will be
paid $1,200 per day payable before the 15th day of the following month. Travel
expenses will be paid at the rate of $0.35/km and meal and lodging
expenses will be reimbursed at cost upon presentation of a monthly expense account;
-
Mr. Vachon will
report to the President, Robert Roy, and the Vice‑President, strategic
partnership development of Sajo, Gilles Thompson;
- Mr. Vachon will have
full authority and responsibility in fulfilling his mandate and will be
involved in the decision-making of all aspects of the business’s day-to-day
management;
-
In the case of investments
and/or the hiring of outside consultants, he will have to obtain prior
authorization of the mandates;
-
The main objectives of
Mr. Vachon include, but are not limited to, the following:
A. The development and
implementation of a work plan approved by mandates following diagnostic tests
prepared by Gestion Michel Aubry and the Créatech group.
The main areas for
improvement are as follows:
(a) the company’s profitability;
(b) the business’s
commercial development (business plan, action plans);
(c) a complete overhaul of
the company’s organization chart (analysis of the structure, optimization of
work and business processes);
(d) the mobilization of
human resources (overall compensation policy, job description, introduction of the
principle of accountability).
B. The
development and implementation and necessary follow-up of a mentorship and personal
and professional development program for the president.
[5]
The second agreement is
dated December 12, 2002, and like the first agreement, it was signed by Mr. Vachon,
as acting officer, and by Mr. Roy, as president of Les produits
métalliques Roy Inc. The terms and conditions of the second agreement are
similar to the first agreement and such agreement applies to the period from February
3, 2003, to November 28, 2003. The main objectives of Mr. Vachon under
this agreement are as follows:
[TRANSLATION]
A. The
implementation of the 2003‑2005 business plan and the 2002‑2003
operational plan arising therefrom; and
B. The implementation of
the mentorship and personal and professional development program for the
president.
[6]
The third agreement is
dated October 2, 2003, and like the previous agreements, it was signed by Mr. Vachon,
as acting officer, and by Mr. Roy, as president of Les produits
métalliques Roy Inc. The terms and conditions of the third agreement are
similar to the previous agreements and such agreement applies to the period
from December 1, 2003, to December 2, 2005. The main objectives of Mr.
Vachon under this agreement are as follows:
[TRANSLATION]
A. The
implementation of the 2003‑2005 business plan and the operational plan
arising therefrom; and
B. The implementation of
the mentorship and personal and professional development program for the
president; and
C. The development of a
high-performing management team as well as the achievement of an adequate transition
with the assigned chief executive officer to ensure business continuity and the
organizational development underway.
[7]
The fourth and last
agreement is dated August 24, 2004, and it was also signed by Mr. Vachon, as
acting officer, and by Mr. Roy, as president of Les produits métalliques
Roy Inc. The terms and conditions of the fourth agreement are similar to the
previous agreements and such agreement applies to the period beginning on
August 3, 2004, and ending on November 30, 2004. However, said agreement
stipulates that
[TRANSLATION]
(i) the services of Mr. Vachon
will be retained three days per week, namely Tuesday, Wednesday and Thursday;
(ii) the president of the
business may terminate the services of Mr. Vachon at any time but will be
obliged to continue to pay his salary until November 30, 2004;
(iii) Mr. Vachon may withdraw
from his mandate at any time, as of August 31, 2004, and the company’s
obligation to pay his salary may cease as of his last day of work. The main
objectives of Mr. Vachon will be as follows:
A. The development
of a transition plan to ensure business continuity and the organizational
development underway;
B. The
implementation of the transition plan taking into account that no chief
executive director will take Mr. Vachon’s place once his mandate has ended;
C. The joint
training of the president and assigned staff to ensure the performance of the
duties contained in the transition plan.
This last agreement cancels and replaces
all other agreements between parties, whether written or oral, including the agreement
signed on October 2, 2003.
[8]
All these agreements
were governed by the laws of the Province
of Quebec and contained a clause
protecting confidential information obtained during the course of Mr. Vachon’s
mandate.
[9]
On August 21, 2003,
Mr. Vachon formed the company 9132‑8518 Québec Inc. of which he
was one of the directors (the other being his wife), the president and principal
shareholder. That company also operated as Normand Vachon Service. As of September
2003, the Mr. Vachon’s consulting fees were paid to Normand Vachon Service
(except for that of September 2003 which was payable to Normand Vachon
Inc.)
[10]
Over the course of the
relevant period, the Worker issued 29 monthly invoices for 576 working days, that
is, 20 to 23 working days per month, except for the first invoice (7 days) and
the four last invoices for 2004, which were for 13 days, 14 days, 12 days and 12
days, respectively. The total amount paid in consulting fees was $691,200, plus
GST in the amount of $48,384 and QST in the amount of $55,188.18.
During the relevant period, three GST numbers were used by Mr. Vachon.
[11]
The Payor is a
family-run business which made a profit at the beginning of the year 2000 on an
investment of 4.5 million dollars by the company’s main client, Sajo. The
Payor, whose head office is located in St‑François de Montmagny, operates
a commercial furniture manufacturing business. The company has about 200 non-unionized
employees. In 2002, the financing partner was dissatisfied with the company’s
financial results and convinced Mr. Roy to commission a study on the
Payor’s operations. That mandate was given to the firm Gestion Michel Aubry
Inc. One of the recommendations the consulting firm made was to hire a person
with experience as acting chief executive officer on a full-time basis.
Analysis
[12]
Paragraph 5(1)(a)
of the Act defines the notion of “insurable employment” as follows:
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.
. . .
[13]
It is well-established
in law that we must look to the provisions of the Civil Code of Québec
(the C.C.Q.) to determine whether there was a contract of employment or a
contract for services between the parties. Articles 2085, 2098 and 2099 of the
C.C.Q. provide that the primary criterion for distinguishing between the two
types of contracts is the relationship of subordination that characterizes the
contract of employment. The provisions of the C.C.Q. read as follows:
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 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.
Art. 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.
[14]
In addition to these articles,
we must refer to articles 1378, 1425, 1426 and 1440 of the C.C.Q. which apply
to contracts in general. The articles read as follows:
Art. 1378 A contract is an agreement of wills by which one or
several persons obligate themselves to one or several other persons to perform
a prestation.
Art. 1425 The common intention of the parties rather than
adherence to the literal meaning of the words shall be sought in interpreting a
contract.
Art. 1426 In interpreting a contract, the nature of the
contract, the circumstances in which it was formed, the interpretation which
has already been given to it by the parties or which it may have received, and
usage, are all taken into account.
Art. 1440 A contract has effect only between the
contracting parties; it does not affect third persons, except where provided by
law.
[15]
The legal nature of the
relationship between the Payor and the Worker was not clearly set out in the
four agreements between them. It was specified that the Worker was to act as
acting chief executive officer and that his mandate was to be carried out on a
full-time basis from Monday to Friday. The Worker reported to the president of
the Payor and the vice-president, strategic partnership development of Sajo. The
Worker’s salary was a fixed amount per day with the reimbursement for travel,
meal and lodging expenses. Said agreements did not contain any provisions
regarding vacation, fringe benefits and incentive bonuses. The agreements had a
term of less than a year, except for the third agreement, which originally had
a term of two years.
[16]
If we take into account
the terms and conditions of the agreements, the circumstances in which they
were formed and the interpretation which has been given to them by the parties such
as the fact that the GST and the QST was invoiced and paid on the salary
amounts and that no source deductions were made on those amounts, it seems
quite clear to me that the parties had a common intention to form a contract of
enterprise or for services.
[17]
In seeking the
intention of the parties to the contract, I did not attach any importance to
the fact that the Worker used the company 9132‑8518 Québec Inc. to
invoice the cost of his services to the Payor, considering that the company was
not party to the agreements concluded with the Payor (Art. 1440, C.C.Q.). Furthermore,
there is no evidence that the Worker assigned his rights under those agreements
in favour of 9132‑8518 Québec Inc. Finally, the third and fourth
agreements dated October 2, 2003, and August 24, 2004, respectively, were
signed by the Worker personally as acting officer of the Payor rather than by
the company which existed at the time. Considering the circumstances, it seems
therefore that 9132-8518 Québec Inc. benefited from a direction of the payment of
the Worker’s consulting fees.
[18]
Even if the intention of
the parties was to form a contract of entreprise or for services, that intention
is not in itself a determining and decisive factor and it is necessary to examine
all the relevant factors of the case and the parties’ conduct in fulfilling the
mandate provided for in the agreements. The evidence clearly demonstrated that
the Worker provided services in favour of the Payor and that he was paid a
salary from the Payor. The only issue, then, is whether there was a relationship
of subordination between the Payor and the Worker.
[19]
Subordination is
verified by reference to the facts. The notion of subordination has evolved
over time to include the degree of specialization of workers. The remarks of Robert
P. Gagnon in Le droit du travail du Québec, Éditions Yvon Blais, 2003
5th edition, at page 67 are particularly interesting on the subject:
. . . The reason for this is that the
diversification and specialization of occupations and work methods often made
it unrealistic for an employer to be able to dictate or even directly supervise
the performance of the work. Consequently, subordination came to include the
ability of the person who became recognized as the employer to determine the
work to be performed, and to control and monitor the performance. Viewed from
the reverse perspective, an employee is a person who agrees to integrate into
the operational structure of a business so that the business can benefit from
the employee's work. In practice, one looks for a certain number of indicia of
the ability to control (and these indicia can vary depending on the context):
mandatory presence at a workplace; a somewhat regular assignment of work; the
imposition of rules of conduct or behaviour; an obligation to provide activity
reports; control over the quantity or quality of the services, etc. The fact
that a person works at home does not mean that he or she cannot be integrated
into a business in this way.
[20]
The services of Mr. Vachon
were retained by the Payor for his experience and his qualities as a manager. The
agreements concluded provided that the mandate had to be carried out on a
full-time basis, from Monday to Friday, inclusively, and that the Worker
reported to the president of the Payor and Vice-president of Sajo. There are a
number of indicia that tend to
show that that the Worker was integrated
into the Payor’s organization and that his services were performed for the Payor
on a continuous and exclusive basis during the relevant period, at least until
the signing of the fourth and last agreement on August 24, 2004.
[21]
The position the Worker
occupied was that of acting chief executive officer, a very high position in
the company’s hierarchy. In that capacity, the Worker enjoyed great freedom in
the performance of his duties. It was provided for in the agreements that the
Worker had full authority and responsibility in fulfilling his duties and that
he would be involved in the decision-making of all aspects of the business’s
day-to-day management. These factors clearly demonstrate the extent to which
the Worker was integrated into the Payor’s organization.
[22]
The Worker also
represented the Payor in dealings with clients and suppliers as evidenced by
his invoices for meal and entertainment expenses.
[23]
The accomplishment of
the objectives described in the agreements required from the Worker that he carry
out the vast majority of his activities at the Payor’s establishment (offices
and factory) even though there was no particular requirement for compulsory
presence at the Payor’s establishment or for a specific work schedule. The parties
do not agree on the duration of the Worker’s presence at the Payor’s
establishment. The Worker claims that he only spent 3½ days per week working
from the company’s premises, whereas according to the information provided
by Mr. Roy to the appeals office, the Worker spent 95% of his time at the
Payor’s establishment.
[24]
The agreements did not
contain any requirement as to exclusive service provision by the Worker but
considering the nature of the work to be performed, it was unthinkable that the
Worker would have someone else replace him. In any case, the hiring of outside consultants
was subject to the prior approval of Messrs. Roy and Thompson.
[25]
Considering that one of
Mr. Vachon’s main objectives was to implement a training program and personal
and professional development program for the president of the Payor, there is every
reason to believe that the Worker therefore necessarily worked under the supervision
and control of the president.
[26]
In the context of a
family-run business whose principal shareholder is the president, I cannot see
how the Worker could have performed his duties and met his objectives without
being under the supervision and control of the president. This is even more
obvious if we take into account the observations contained in the report of the
firm Gestion Michel Aubry Inc. that Mr. Roy was feared and
esteemed by his employees, that he decided everything and that he intervened in
all of the company’s areas of activity. The following excerpt taken from page
18 of the report is very telling:
[TRANSLATION]
Decision-making process
The employees and managers we met with are unanimous: Robert is the
one who decides. Some go even further: The company’s main client is Robert. In
addition to selling our projects to the client, we must sell our ideas to Robert.
Decisions may vary greatly depending on his mood at the time.
[27]
According to the
agreements, the Worker reported to the president of the Payor and the vice-president
of Sajo. That provision clearly establishes the power of direction or control
of the president over the Worker, exercised jointly or severally wth the
vice-president de Sajo. According to the report of the appeals officer, the
Worker issued reports each week or every two weeks on the progress of matters. The
following excerpt taken from the first paragraph of page 7 of the appeals
officer’s report is very telling with respect to the modus operandi of the parties
involved and the degree of participation of Mr. Roy in the operational process:
[TRANSLATION]
. . . The worker helped them identify the problems owing to his experience.
Whenever a problem arose, the Worker and Robert Roy and Sajo (new investor)
worked out a game plan between them. They agreed on how to intervene and followed
up on the outcome.
[28]
Even if the Worker provided
his own equipment necessary for the performance of his work (e.g. computer, software,
cellular telephone), he did not incur any financial risk in performing his work
for the Payor. He was paid per diem and was reimbursed for his travel, meal and
lodging expenses.
[29]
Considering the
foregoing, my finding is that the Appellant has not, on a balance of
probabilities, satisfied me that the Respondent’s decision to consider him as
being an employee of the Payor during the period from June 10, 2002, to
December 31, 2004, is incorrect. In my view, there was in fact truly a
relationship of subordination between the Payor and the Appellant.
[30]
Accordingly, the appeal
is dismissed.
Signed at Montréal, Quebec, this
4th day of February 2009.
“Réal Favreau”
Translation
certified true
on this 31st day
of March 2009.
Daniela Possamai,
Translator
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