Citation: 2007TCC604
Date: 20071114
Dockets: 2004-3717(EI)
2004-3718(EI)
BETWEEN:
9020-8653 QUÉBEC INC.,
Appellant,
and
THE MINISTER OF NATIONAL REVENUE,
Respondent.
[OFFICIAL ENGLISH TRANSLATION]
REASONS FOR JUDGMENT
Bédard J.
[1] These are two
appeals heard on common evidence. Appeal No. 2004‑3718(EI) is from a
decision by the Minister of National Revenue of Canada (the Minister) that the
work carried out by Mario Caron (the Worker) while working for the
Appellant meets the requirements for a contract for services within the meaning
of paragraph 5(1)(a) of the Employment Insurance Act (the
Act). The relevant periods for this appeal are February 20, 1997, to January
17, 1998; February 1, 1998, to September 5, 1998; December 13, 1998, to May 1,
1999; May 9, 1999, to May 29, 1999; June 6, 1999, to April 29, 2000; and June
25, 2000, to January 19, 2003 (the "relevant periods").
[2] Appeal
No. 2004‑3717(EI) deals with an assessment established by the
Minister for the Appellant's employment insurance premiums for the Worker for
2000, 2001 and 2002. The assessments were established as follows:
|
YEAR
|
EI
PREMIUMS
|
PENALTY
|
INTEREST
|
TOTAL
|
|
2000
|
$2,106.56
|
$210.61
|
$660
|
$2,977.17
|
|
2001
|
$2,106.00
|
$210.56
|
$430
|
$2,746.56
|
|
2002
|
$2,059.17
|
$205.87
|
$226
|
$2,491.04
|
|
Total
|
$6,271.73
|
$627.04
|
$1,316
|
$8,214.77
|
[3] To explain his
decisions, the Minister relied on the same presumptions of fact in both
appeals; these were admitted or denied by the Appellant as indicated below:
[translation]
(a) the Appellant was incorporated on May 23,
1995; (admitted)
(b) the Appellant carried on business under
the name "Motel Richelieu Jonquière"; (admitted)
(c) the Appellant operated a motel with 100
rooms, a restaurant seating 72 and a bar that could accommodate 400 people; (admitted)
(d) the Appellant hired around 100 employees
every year; (admitted)
(e) the Worker is a carpenter; (admitted)
(f) the Appellant hired the Worker in 1995; (admitted)
(g) the Appellant assigned jobs to the Worker;
(admitted)
(h) the Worker's duties were to take care of
renovations to the motel rooms, the bar and the restaurant, and also to ensure
general maintenance; (denied)
(i) renovation of the bar and restaurant was
done yearly by the Appellant, and the Worker took from 2 to 3 months for the
bar and 1 to 2 months for the restaurant; the rest of the year was dedicated to
the gradual renovation of the rooms; (denied)
(j) general maintenance to fix equipment took
the Worker around 15 hours a week; (admitted)
(k) the Worker entered his arrival and
departure times as did all the Appellant's other employees; (admitted)
(l) the Worker's hours of work varied from
week to week depending on the work to be done; (denied as written)
(m) the Worker was to respect the deadlines the
Appellant established; (admitted)
(n) the Worker was assisted in his duties by a
salaried employee of the Appellant; (denied)
(o) the Worker had to carry out his duties
personally and could not be replaced; (denied)
(p) since 1997, the Worker has been providing
his services to the Appellant on a regular basis every week, often for more
than 40 hours a week; (denied as written)
(q) the Appellant exercised a right of control
over the Worker's work and hours of work; (denied)
(r) the Worker was paid on an hourly basis; (admitted)
(s) the Worker received $17 an hour for
renovation work and $15 an hour for general maintenance; (admitted)
(t) the Worker was paid by cheque every
Wednesday; (admitted)
(u) the Worker provided small carpentry tools;
(denied as written)
(v) the Appellant provided the Worker with a
table saw, a router and a paint gun; (denied as written)
(w) the Appellant provided the Worker with a
cell phone; (admitted)
(x) when the Worker travelled with his
personal vehicle, the Appellant gave him $10 a week; (denied)
(y) the Appellant provided all the materials
necessary for the Worker to carry out his duties; (admitted)
(z) the Worker had no risk of loss or
possibility of profit from carrying out his duties for the Appellant; (denied)
(aa) the Worker's duties were integrated into
the Appellant's activities; (denied as written)
(bb) on February 24, 2004, the Appellant
received a formal demand from the Commission des normes du travail du Québec
regarding unpaid amounts for vacation and statutory holidays owed by the
Appellant to the Worker; (admitted)
(cc) during the last 27 weeks of the period, the
Worker received $23,448.47 from the Appellant; (no knowledge)
(dd) over the last 53 weeks of the last
employment period, the Worker worked 2,493 hours; (no knowledge)
Preliminary remarks
[4] Guy Desmeules, one
of the Appellant's shareholders and directors, Sandra Tremblay, the
Appellant's comptroller, and Marc‑André Émond, former accommodations
director, testified in support of the Appellant's position. Only the Worker
testified in support of the Respondent's position.
Mr. Desmeules's testimony
[5] Mr. Desmeules
stated that:
(i) in
1995, he and Roger Simard acquired shares in the Appellant, which operated a
motel that was in a deplorable state because of a clear lack of maintenance
since its construction in 1970;
(ii)
because financial resources were very limited, the Appellant could not renovate
the motel too quickly. This is why, during the relevant years, the Appellant
granted most of the carpentry contracts for renovation to the Worker, who was a
small supplier and worked alone;
(iii) the Appellant did the following
renovations from 1995 to 2002:
|
Type of work
(1) Renovation of bar
(2) Small renovation
of bar
(3) Renovation of five
rooms
(4) Preparation work
for installing "Convectair" brand heating units in 103 rooms
(5) Construction and
installation of counter in bar
(6) Renovation of 12
rooms
(7) Renovation of 12
rooms
(8) Renovation of cold
room
(9) Renovation of
kitchen
(10) Renovation of
downstairs, toilets in changeroom and reception
|
Year
1995
end of 1995
1996
1997
1997
1998
1999
1999
2000
2000
|
Duration of work
7 to 9 weeks
3 weeks
6 to 7 months
January to September
October and November
12 months
January to November
December
January to April
July to December
|
(iv) the Worker
worked for the Appellant continuously during the entire period of the
renovation work mentioned above. Mr. Desmeules also admitted that during
the relevant periods, the Worker took care of general maintenance of the motel
for around 15 hours a week;
(v) during the
relevant periods, the Worker was free to choose his methods for carrying out
the renovation and maintenance work;
(vi) during the
relevant periods, the Worker was not required to remain available to the
Appellant following a schedule the Appellant established. According to Mr.
Desmeules, the Worker could have worked as many hours as he wanted, according
to his own schedule. Mr. Desmeules explained that the Worker did not have to
respect the rule that the Appellant imposed on all the other employees,
according to which they could not work more than 40 hours a week;
(vii) the Worker recorded
his work hours using a time clock as all the Appellant's other employees did,
not because it was required by the Appellant, but because he thought this
method would allow him to precisely establish the number of hours he worked for
the Appellant;
(viii) the Worker
always provided tools to carry out the contracts granted by the Appellant,
except for a table saw the Appellant purchased in 2001;
(ix) the materials
the Worker used to carry out the contracts granted by the Appellant were
provided by the Appellant;
(x) the contracts
the Appellant granted to the Worker did not require him to carry out the work
himself. However, Mr. Desmeules stated that the Appellant had to accept the
replacement chosen by the Worker;
(xi) the Worker
accomplished many carpentry contracts for other people during the relevant
periods without having to obtain the Appellant's permission;
(xii) the Appellant
paid the Worker $17 an hour for renovation work;
(xiii) the Appellant
paid the Worker $15 an hour for motel maintenance work;
(xiv) every week, the
Worker gave the Appellant a piece of paper with the hours of work for that
week, in the form of an invoice. Upon presentation of the invoice, the
Appellant immediately drew a cheque on his bank account to cover the Worker's
invoice. Mr. Desmeules explained that compensation of all employees was always
done by direct deposit to their bank accounts;
(xv) the Appellant
always considered the Worker as a supplier and not an employee. I immediately
note that this claim was contradicted by documents submitted to evidence by the
Respondent (Exhibit I-1) during Mr. Desmeules's cross-examination. This
documentary evidence shows that the Appellant had included the name of the
Worker in his pay register for at least a few months in 1996, gave him a
statement of earnings, withheld income tax and paid social security benefits. I
would point out that Mr. Desmeules simply replied that he did not recall
this fact while being cross-examined on the issue by Counsel for the Respondent.
I also note that I was particularly dumbfounded during cross-examination to
hear Mr. Desmeules say that the Appellant had offered to treat the Worker
as an employee on many occasions. Mr. Desmeules even added that the Worker
always refused the Appellant's offers, although the advantages of being an
employee were explained. This means that the Appellant treated the Worker as a
supplier not because it considered him as such, but because the Worker did not
want to be treated as an employee. In a way, it appears that the Appellant had
to meet the Worker's requirements in order to benefit from his services.
Sandra Tremblay's
testimony
[6] During her
testimony, Ms. Tremblay, the Appellant's comptroller during the relevant
periods, essentially confirmed most of Mr. Desmeules's statements. I note that
Ms. Tremblay, like Mr. Desmeules, did not recall that the Appellant had entered
the Worker's name in the pay register for a few months in 1996. Ms. Tremblay
added that she herself prepared the yearly "Costs Incurred for Work on an
Immovable" statements (Exhibit A‑2), and that the Appellant had
filed these statements as required with the Québec Minister of Revenue. Ms.
Tremblay explained that these statements included the names of all suppliers
who, during a given year, carried out renovation, improvement, maintenance or
repair work on the motel and the amount paid or to be paid to these suppliers
for the work. Ms. Tremblay noted that the statements show the Worker was a
supplier for the Appellant in 1997, 1998, 1999, 2000, 2001 and 2002, and, for
these services, the Appellant paid him $36,297.50 in 1997, $21,523 in
1998, $34,210.75 in 1999, $36,105.85 in 2000, $45,078.25 in 2001
and $40,322.50 in 2002.
Marc‑André Émond's testimony
[7] In his sworn
statement, submitted as Exhibit I‑2, Mr. Émond stated the following:
[translation]
Declaration under oath
Affidavit
...
I have known Mario Caron since July
1999, when I started working at the Motel Richelieu as accommodations director.
I worked together with Mr. Caron all the time, as there were many defects
throughout the hotel due to the many client complaints.
Our duties were expanded and we had to
solicit bids from alcohol companies and manage the bar and restaurant
inventory. Moreover, when there was a staffing problem, Mario Caron and I had
to take care of the restaurant during our on-duty hours. Mr. Caron took care of
the food supplies while I took care of the schedules.
We had a cell paid for by Motel
Richelieu, for which we were available 24 hours a day, with no monetary
compensation.
Mario Caron punched in his time as any
other employee and I gave him his paycheque at the same time as everyone.
His work brought him to the computer at
the reception to see what work had to be done in the rooms. There was a special
area reserved for him.
Mr. Caron had to travel to go get
materials and tools to carry out the maintenance and renovation work at the
Motel Richelieu. For those trips, varying from 2 to 300 km, he received $10. I
gave it to him. Moreover, he was paid $15 an hour for maintenance and $17 an
hour for renovations. It was split around 60% renovation and 40% maintenance.
Among his duties, Mr. Caron was required to carry out dangerous work
without having the certificates of competency to carry them out (propane, 600 volts,
water heater...) in order to reduce costs and he did so with no training
offered by the employer.
I was made aware of the four weeks’ pay that was seized
from Mario Caron.
Under orders by Guy Desmeules, I placed an employment offer to find
someone for the maintenance, in order to replace Mario Caron without his
knowledge.
...
[8] During his
testimony, Mr. Émond added that, to his knowledge, the Worker [translation] "worked when he
wanted to", and he "had no control over the Worker's schedule".
Mr. Émond also said that the Appellant's clients complained to the Appellant
that the employees monopolized the video lottery terminals. The Appellant
therefore prohibited his employees from playing on theseterminals. Mr. Émond
said that the Worker often told the Appellant's clients that he was not an
employee but a supplier, so that they would not complain about his use of the
video lottery terminals.
Worker's testimony
[9] The Worker first
described a typical workday with the Appellant. First, he read a work order
similar to the one produced as Exhibit I-2, on which the defects noted by the
room attendants were written. He would correct the defects and then continue
with renovations according to the Appellant'sinstructions.
[10] The Worker also testified
that
(i) he
worked on a continuous and exclusive basis for the Appellant during the
relevant periods, from 55 to 75 hours a week. He added that the Appellant
required him to be available 24/7 to respond to emergencies. He explained that
the Appellant provided him with a cell phone specifically to be sure he could
be reached at all times;
(ii) the
Appellant required the services to be exclusive. He stated that permission to
carry out a minor contract for a third party was not granted by the Appellant.
The Worker admitted he participated with his brother in a contract to make
furniture during his Christmas holidays in 2002. He also admitted that he
worked for the restaurant Chez Pierre from May 11 to 25, 1998, with the
permission of Mr. Desmeules and at the bar Chez Claude for a few days in
December 2002;
(iii) he
became a general handyman for the Appellant. In addition to renovating the
motel and taking care of general maintenance, he verified the work of other
suppliers (plumber, electrician, carpet layer, etc.). He even added that the
Appellant did not pay these suppliers without his authorization. He also
supported Mr. Émond's statement that the Appellant also occasionally granted
him the responsibility of supply and control of food and drinks. The Worker
noted that the Appellant had designated him, with the Jonquière fire
department, as the first person to reach in case of fire. He also testified
that the Appellant required him to supervise the work of Alain Bouliane, a
general maintenance worker at the motel;
(iv) the
Appellant required that he record his work hours using a time clock;
(v) all
his renovation work on the motel was carried out under the supervision of Mr.
Desmeules. The Worker explained that Mr. Desmeules told him the exact nature of
the work to be done and the deadlines within which the renovation work was to
be completed. He added that he met with Mr. Desmeules two or three times a week
to report on the progress;
(vi) the
big tools were provided by the Appellant;
(vii) he occasionally
used his car to get materials and tools he needed to renovate the motel and
perform general maintenance. The Appellant then gave him around $20 a week as
expenses related to his car, which he incurred when carrying out his work
duties;
(viii)
he always saw himself as an employee and not as a service supplier. He added
that the Appellant, despite repeated requests, did not want to recognize him as
an employee and he resigned himself to accept the status given to him by the
Appellant and to handle the income from the Appellant as business income.
Analysis and conclusion
[11] When the courts are
called upon to define concepts from Quebec's private law for the purposes of applying a
federal statute such as the Employment Insurance Act, they must comply
with the interpretation rule at section 8.1 of
the Interpretation Act. To determine the nature of a contract of
employment in Quebec and distinguish it from a contract for service, the relevant provisions
of the Civil Code of Québec (the Civil Code) must be considered, at
least since June 1, 2001. These rules are inconsistent with the rules stated in
decisions such as 671122 Ontario Ltd. v. Sagaz Industries Canada Inc.,
[2001] 2 S.C.R. 983 and Wiebe Door Services Ltd. v. M.N.R., [1986]
3 F.C. 553. Contrary to the common law situation, the elements that
constitute a contract of employment are codified and, since the coming into
force of articles 2085 and 2099 of the Civil Code on January 1, 1994, courts no
longer have the latitude that common law courts have to define what constitutes
a contract of employment. If it is necessary to rely on decisions from the case
law to determine whether there was a contract of employment, then decisions
with an approach that conforms to the civil law principles must be chosen.
[12] The Civil Code has distinct
chapters on the "contract of employment" (articles 2085 to 2097) and
on the "contract of enterprise or for services" (articles 2098 to
2129).
[13] Article 2085 states that the 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.
[14] Article 2098
states that the contract of enterprise
... 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.
[15] Article 2099
follows, and states the following:
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.
[16] It can be
said that the fundamental distinction between a contract for service and a
contract of employment is the absence, in the first case, of a relationship of
subordination between the provider of services and the client, and the
presence, in the second case, of the right of the employer to direct and
control the employee. In this case, it must be determined whether there was a
relationship of subordination between the Appellant and the Worker.
[17] The
Appellant has the burden of showing, on a balance of probabilities, that the
facts in question establish his right to have the Minister's decision quashed.
It must establish the contract concluded between the parties and their joint
intent as to the nature of this contract. If there is no direct evidence of
this intent, the Appellant may turn to indicia in accordance with the contract
and the provisions of the Civil Code that governed it. The Appellant
must, in this case, show the absence of a relationship of subordination in
order to establish that a contract of employment did not exist, and to do so,
it may, if necessary, use indicia of independence such as those stated in Wiebe
Door, supra, namely ownership of tools and the risk of loss and
possibility of profit. However, I feel that contrary to the common law
approach, once a judge finds the absence of a relationship of subordination,
that is the end of the analysis to determine whether there is a contract for
service. It is not necessary to consider the relevance of ownership of tools
and the risk of loss or possibility of profit, since under the Civil Code, the
absence of a relationship of subordination is the only essential element of a
contract for service that distinguishes it from a contract of employment.
Elements such as ownership of tools and the risks of loss or possibility of
profit are not elements essential to a contract for service. However, the
absence of a relationship of subordination is a determining factor. With regard
to the two types of contract, it must be determined whether there is a
relationship of subordination. Obviously, the fact that the Worker acted as a
contractor could be an indication that there was no relationship of
subordination.
[18] Ultimately,
decisions should usually be rendered by the Courts on the basis of facts shown
by the evidence regarding the execution of the contract, even if the intention
shown by the parties indicates the contrary. If the evidence regarding the
execution of the contract is not conclusive, a decision can still be rendered
according to the intention of the parties and the way they described the
contract, if the evidence is probatory on these issues. If the evidence is
still not conclusive, then the Appellant's appeal will be dismissed on the grounds
of insufficient evidence.
[19] I must note that the
Appellant must show the absence of a relationship of subordination on a balance
of probabilities to establish that there was no contract of employment. I must
also note that if the evidence shows elements of both autonomy and
subordination, the conclusion must be that there was a contract of employment
because the contract for service must be carried out with no relationship of
subordination. This is what Picard J. decided in Commission des normes du
travail v. 9002-8515 Québec inc, No. 505‑05‑020995‑963,
April 6, 2000 (Superior Court of Québec):
[
15. In order for there to be a contract of enterprise, there must be no
relationship of subordination…A sufficient number of indicia exists in this
case of a relationship of authority.
[20] Experience shows
that some employers, wanting to reduce their fiscal burden and payroll taxes
with respect to their employees, decide to treat them as independent
contractors. This decision can be made either at the outset of the
contractual relationship or later on. Similarly, some employees could have an
interest in disguising their contract of employment as a contract for services
because the circumstances are such that they do not foresee that they will need
employment insurance benefits and they do not want to pay their employee
premiums to the employment insurance program. Since the Act generally
authorizes the payment of employment insurance benefits only to employees who
lose their employment, the courts must be on the alert to unmask false
self-employed workers. The courts must also ensure that the employment
insurance fund, which is the source of these benefits, receives premiums from
everyone who is required to pay them, including false self-employed workers and
their employers.
[21] In this case, the
evidence (Exhibit I‑1) showed that the Appellant had treated the
Worker as an employee for at least a few months in 1996 and that at the end of
that period, the Appellant recognized the Worker as a self-employed worker.
Neither the Appellant nor the Worker could explain the circumstances that led
to the Worker's ceasing to be an employee. On this subject, I would like to
restate that Mr. Desmeules testified that the Appellant had never included the
Worker in his pay register. When faced with the documentary evidence that
showed the contrary, Mr. Desmeules simply stated he did not remember this fact.
Even Ms. Tremblay, the Appellant's comptroller, did not remember this
fact. Even after having his memory refreshed, Mr. Desmeules was not able to
give any explanation for this sudden change in the Worker's status in 1996.
Moreover, I note that the Worker's testimony on this subject was
incomprehensible and unintelligible, at the very least. I had the clear
impression that Mr. Desmeules and the Worker were hiding the truth and their
testimony must therefore be reviewed with great care. The sudden and
unexplained change in the Worker's status in 1996 leads me to believe that the
true contractual nature of the relationship was being hidden starting in 1996.
Moreover, when Mr. Desmeules gave his quite stunning testimony, stating that
the Worker refused to be treated as an employee, was this not implicit
confirmation that the true nature of the contractual relationship was being disguised?
In a way, Mr. Desmeules told us that the Appellant had granted the Worker the
status of self-employed worker not because it believed he was a self-employed
worker, but because it was forced by the Worker to recognize this status in
order to be able to retain his services. Even if the Worker forced the
Appellant to recognize he was self-employed, which I doubt, this would not
change the fact that the true nature of the contractual relationship was
disguised. My opinion is that, in this case, the two parties agreed to disguise
the truth because each could see a benefit in doing so. First, the Worker
probably no longer wanted to pay the employee premiums to the employment
insurance plan, the circumstances being that he did not foresee a need for employment
insurance. Also, the Appellant probably wanted to reduce his fiscal burden and
payroll taxes with respect to the Worker. The Appellant probably did not want
to pay the Worker according to the rates applying to hours of work exceeding 40
hours a week.
[22] Some elements in the
Worker's testimony not contradicted by Mr. Desmeules's testimony and other
elements in the Worker's testimony corroborated by Mr. Émond's affidavit
(Exhibit I‑2) and testimony, as well as by the documentary evidence
(Exhibits I‑3, I‑4, I‑5 and I‑6), also lead me to
find that the Worker was an employee during the relevant periods. The fact that
the Worker devoted around 50 hours a week to a single payor, nearly
continuously for the relevant periods, leads me to believe that he was
completely integrated into the payor's company. On this, I note that the Worker
had at most carried out a few small contracts during the relevant periods, and
he did so during his vacation. This regular and prolonged collaboration is, to
me, a clear indication of a relationship of subordination between the Appellant
and the Worker. The fact that the Worker became a handyman for the Appellant is
confirmation to me that he was completely integrated into the Appellant's
company. On this, the evidence showed that, in addition to renovating the
motel, the Worker carried out general maintenance on the motel and occasionally
had the responsibility of managing the Appellant's bar and restaurant stock. I
would also note that the Appellant had designated the Worker with the Jonquière
fire department as the first person to contact in case of fire. The Worker's
requirement to be available 24 hours a day to respond to emergencies is also,
in my opinion, an indication of a relationship of subordination. I will restate
that the Appellant provided the Worker with a cell phone to ensure his
availability at all times. The regular designation of specific tasks to
accomplish also indicates there was a relationship of subordination between the
Appellant and the Worker. I would note that on this subject, every morning, the
Worker was to read a work order similar to the one submitted as evidence as
Exhibit I-2 and he had to first repair any defects that were listed on the
order. Lastly, the fact that the Appellant reimbursed work expenses is another
indication of a relationship of subordination.
[23] For these reasons,
the appeals are dismissed.
Signed at Ottawa, Canada, this
14th day of November 2007.
"Paul Bédard"
on this 4th day of January 2008.
Elizabeth Tan, Translator
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