Citation: 2008 TCC 524
Date: 20080925
Docket: 2007-622(EI)
BETWEEN:
LES ENTREPRISES UNE AFFAIRE D'ANGLAIS INC.,
Appellant,
and
THE MINISTER OF NATIONAL REVENUE,
Respondent,
and
JOHN CHEETHAM,
Intervener.
[OFFICIAL ENGLISH
TRANSLATION]
REASONS FOR JUDGMENT
Favreau J.
[1]
This is an appeal by
Les Entreprises Une Affaire d’Anglais Inc. (Une Affaire d’Anglais) from a
decision by the Minister of National Revenue (the Minister) that
John Robert Cheetham (the worker) held insurable employment with Une
Affaire d’Anglais during the period of June 30, 2004, to June 30, 2005, because
this employment was carried out under a contract of service within the meaning
of paragraph 5(1)(a) of the Employment Insurance Act,
S.C. (1996), c. 23, as amended (the Act).
[2]
The Minister determined
that the worker was employed by Une Affaire d’Anglais under a contract of
service, relying on the following presumptions of fact stated at paragraph 21
of the Reply to the Notice of Appeal:
[translation]
(a)
the appellant was incorporated on July 15, 1993;
(admitted)
(b)
the appellant offered language training in
English and other languages to business people and professionals; (admitted)
(c)
the appellant had 9 employees, including
full-time trainers, and 35 to 40 part-time trainers, which the appellant
considered sub-contractors; (admitted)
(d)
the appellant had developed an original training
program called "Go-Ahead"; (denied)
(e)
the language courses were given at the offices
of the appellant's clients; (denied as written because courses were given
outside the appellant's offices)
(f)
the worker is Australian, and immigrated to Canada in 1998; (no knowledge)
(g)
the worker had a bachelor's degree in history
and a teaching licence; (no knowledge)
(h)
the appellant hired the worker in 2001; this was
his first job in Canada; (denied)
(i)
the worker did not sign a contract with the
appellant, but on September 18, 2003, the parties signed a non-solicitation and
confidentiality agreement; (admitted)
(j)
the worker was an English trainer; (admitted)
(k)
the worker's duties were to give 90-minute
classes to the appellant's clients; (denied as written because the length of
the classes varied)
(l)
when he was hired, the worker took a 2-day
training session given by the appellant; (admitted)
(m)
later, the worker took a 3- or 4-day training
session to expand the "Go-Ahead" learning method; (denied)
(n)
these training sessions were mandatory for all
new teachers, and at the beginning of each year, the worker was required to
take a number of workshops to improve his skills and learn about the training
plans; (denied because the training was not mandatory)
(o)
the worker had the support of the appellant's
technical team and a mentor appointed for a probationary period of 2 to 4
months; (denied)
(p)
the training hours, training locations, students
to train and training objectives were established by the appellant; (denied)
(q)
training was generally given at the offices of
the appellant's clients; (admitted)
(r)
the worker had to use the teaching method
developed by the appellant; (denied)
(s)
the worker had to attend mandatory meetings to
discuss objectives and ongoing problems; (denied)
(t)
the appellant provided the teaching material and
exercises; (denied)
(u)
the worker had access to the appellant's offices
to make photocopies (1000 per month), to access the library and the teachers'
room for research and class preparation; (admitted)
(v)
the worker had to assess the students at the end
of each session according to an evaluation grid and criteria established by the
appellant; (admitted)
(w)
the worker had to carry out his duties
personally, and could not hire a replacement at any time to give the course in
his place; (denied)
(x)
the worker reported regularly to the appellant,
including billing, attendance lists and class operations according to the
teaching plan; (denied)
(y)
the appellant, not the worker, was responsible
for quality control and would receive any complaints from the clients; (denied)
(z)
the appellant trained the worker and provided
specific instructions on how to carry out his work; (denied)
(aa)
the worker billed the appellant at a rate of $22
per hour; (admitted)
(bb)
the worker worked thirty-some hours per week for
the appellant; (denied)
(cc)
the appellant had asked the worker to register a
corporate name and submit an invoice for services once a month; (denied)
(dd)
on January 28, 2002, the worker registered a
sole proprietorship with the corporate name "JohJoh"; (admitted)
(ee)
the mandatory training courses were billed under
"Various expenses"; (denied as written)
(ff)
the appellant reimbursed the travel expenses
(mileage and meals) for trainers outside a 20 kilometre radius; (denied as
written)
(gg)
the worker received an allowance for travel time
and was reimbursed for beer and wine taken with the students at the end of the
session; (admitted)
(hh)
in 2003 and in 2004, the worker asked the
appellant to be considered an employee; (denied)
(ii)
the worker complained to the Commission des
normes du Travail, which, on April 25, 2006, sent a formal demand notice to the
appellant for $5,978.78 including $3,416.80 for unpaid wages. (admitted
because it is being challenged)
[3]
The appellant feels
that the Minister's decision is unfounded in fact and in law, for the following
reasons, indicated at paragraphs 7 to 32 of the Notice of Appeal:
[translation]
7. The appellant is certified by Emploi‑Québec
as a training organization for the purposes of the Act to promote workforce skills development and recognition (R.S.Q., c. D-7.1 [sic])…in accordance with the Regulation
respecting the accreditation of training bodies, training instructors and
training services (R.R.Q., c. D-7.1, r.1.) (hereinafter the Regulations),
as indicated in the copy of the list of trainers and a copy of the Regulations;
8. This certification granted by
Emploi-Québec is mandatory for all organizations that offer training services
when their clients wish to benefit from the special tax treatment that applies
to the mandatory investment of 1% of total payroll for employee training;
9. To maintain its certification at all
times, the appellant must always comply with the Regulations;
10. The appellant must agree to give training
only by trainers with Emploi-Québec certification, in accordance with the
Regulations and with the required experience and skill;
11. To do so, the appellant must ensure that
its trainers have minimum work experience in each of the fields in which
training is offered and that they have accumulated the training hours pursuant
to the following stipulations in the Regulations;
12. Under the Regulations, these trainers may
be employees of the certified body or contract workers, despite the training
the appellant must give them before courses begin, in accordance with
the Regulations;
13. The Regulations also require that the
trainers provide certain documents at the end of the training session, to
ensure that the courses qualify for the clients' tax credits;
14.
It is therefore imperative that the appellant
respect the conditions in the Regulations; this does not affect the status of
self-employed trainers working for the appellant;
15.
Mr. Cheetham is a certified trainer, as
indicated by the list of trainers;
16.
At all times relevant to the claim, the
appellant operated its business in the same way, it would first enter into
second-language training contracts with its clients and then give a
sub-contract for these training contracts to certified trainers who are
self-employed workers;
17.
The appellant would contact the trainers listed
in the databank and offer them the opportunity to give the course set out in
the contract; they were free to accept or refuse;
18.
There is no contract between the appellant and
these trainers, aside from an agreement of non-solicitation of the appellant's
clients and confidentiality, as indicated in a copy of the non-solicitation and
confidentiality agreement signed by Mr. Cheetham;
19.
These non-solicitation and confidentiality
agreements are not considered non-competition or exclusivity agreements, nor
are they considered contracts of employment;
20.
So, in accordance with the Regulations, the
appellant provides training to independent trainers whose services it relies
on, which, in itself, does not make them the appellant's employees;
21.
Moreover, these trainers are not subject to any
control by the appellant, other than the regulatory obligations imposed on the
appellant as a certified body, and on certified trainers;
22.
While carrying out their services, the trainers
provide the language courses directly in the offices of the appellant's
clients, who have entered into training contracts for the benefit of their
employees;
23.
Moreover, the trainers are free to choose and
establish their specific training plans, as well as the design, programming and
implementation of activities, and they supply the material, equipment and
software, subject to the contract signed between the appellant and its clients;
24.
The trainers manage the work assignments (work
schedule), after reaching an agreement directly with the clients or their
employees. Therefore, the trainers have no obligation to go to the appellant's
place of business;
25.
The trainers are also free to cease offering
their services at any time during a session;
26.
Moreover, these trainers may replace themselves
with another certified trainer of their choice when they so choose. The
appellant's only obligation is to ensure the conditions of the Regulations and
those in the contract with the client are met;
27.
At the end of each session, to comply with the
requirements of the Regulations, the trainers give the appellant the attendance
sheets as evidence of the duration of the training, the employees who
participated in the training, and the employees' success rates;
28.
Moreover, the trainers' services are not
provided exclusively to the appellant and they can also offer their services to
the appellant's main competitors who work in the same sector. They are also
free to offer their services to other companies while respecting their
agreement of non-solicitation of the appellant's clients;
29.
Mr. Cheetham uses the name Johjoh [sic]
for his language consultation activities, as shown in a copy of the CIDREQ
enterprise register report;
30.
However, if this trainer were an employee with a
contract for services as the respondent is claiming, it is unthinkable that he
would also work for the appellant's main competitors at the same time he worked
for the appellant, without it citing the duty of loyalty, which exists in every
employer-employee relationship;
31.
Mr. Cheetham is therefore clearly a
self-employed worker and the respondent's decision regarding the insurability
of his employment based on the existence of a contract for services is
completely unjustified and unfounded in fact and in law;
32.
The appellant and Mr. Cheetham had been carrying
out their activities in the above-noted context for many years without any
debates about his status, until he ended his working relationship with the
appellant.
ANALYSIS
[4]
The applicable law in
this case can be found at articles 2085 to 2097 of the Civil Code of Québec (the
Civil Code) for the "contract of employment" and at articles 2098 to
2129 of the Civil Code for the "contract for services".
[5]
The "contract of
employment" is defined as follows at article 2085 of the Civil Code:
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.
[6]
The "contract of
enterprise or for services" is defined as follows at article 2098 of the Civil
Code:
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.
[7]
The definition of
"contract of enterprise or for service" at article 2098 of the Civil
Code is completed by article 2099 of the Civil Code, which provides the
main characteristic of a contract of enterprise or for services:
The contractor or 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.
[8]
The fundamental
distinction between a contract for services and a contract of employment is the
absence of a relationship of subordination between the provider of services and
the client. In this case, it must be determined whether there was a
relationship of subordination between the appellant and the worker during the
period in question.
[9]
The appellant has the
burden of proving, on a balance of probabilities, facts that would lead to the
Minister's decision being vacated. With no written contract, the common
intention of the parties and their behaviour must be examined.
[10]
Many witnesses were
heard at the hearing. In addition to Diane Ippersiel, 95% owner of the
appellant, and John Cheetham, the worker, the following individuals testified
on the appellant's method of operations:
—
Julie Marcoux: head of
accounting for the appellant;
—
Duncan Flowers: human resources coordinator for
the appellant;
—
Olivier May: trainer;
—
Gregory Hogg: director
of special projects for the appellant;
—
David Ballam: trainer;
—
Peter Darbyshire:
trainer.
[11]
The following, from
this testimony and the documents submitted to evidence, indicate the lack of a
relationship of subordination between the appellant and the worker:
(a) the worker created a
language consultation company under the name "JohJoh" on January 28,
2002, and asked the appellant for his monthly invoices to be paid directly to
JohJoh's bank account starting in February 2002;
(b) the worker has an
office at his residence and covered the costs for his computer, cell phone and
material used to prepare and give his classes; he did not have an office at the
appellant's workplace;
(c) the worker notified
the appellant of his availability and was free to accept or refuse the
appellant's offers of work; there were no sanctions for refusing a contract;
(d) the worker did not
give the appellant exclusivity and he did provide his services to other
clients;
(e) the worker was able to
negotiate the amount of his fees and he had the right to be reimbursed for
certain costs incurred for the benefit of the appellant's clients, such as
beer, chips, wine, etc.;
(f) the worker did not
have the obligation to go to the appellant's workplace since courses were given
at the appellant's clients' offices;
(g) the worker was the
sole person responsible for course preparation, method of presentation, choice
of educational material; course content did not need to be approved by the
appellant;
(h) the worker was also
responsible for coming to an agreement with the clients about his work
schedule; he could cancel classes, reschedule them and even replace himself
with another teacher he himself would find, all without the appellant's prior
approval;
(i) the worker controlled
his work schedule and was not required to work a minimum number of hours per
week, month or session; moreover, he chose his days off and vacation times; the
worker did not have to produce any reports on his use of time;
(j) the worker was not
required to provide weekly or other reports on the progress of his work and the
methods used to give his classes;
(k) during the period in
question, the worker's work was not supervised by the appellant and no
disciplinary measures were taken against him;
(l) the worker was paid
monthly on production of an invoice showing the name of the clients to whom he
gave classes during the month, the level, the days classes were given and the
number of teaching hours; these invoices also included reimbursement requests
for items such as transportation, meals and parking;
(m) the worker did not have
the right to any benefits usually associated with a workload or job, such as a
pension plan, vacation pay, sick leave or group insurance. The appellant did
not make any source deductions for income tax on the amounts paid to the
worker;
(n) in 2005, the appellant
had 8 or 9 employees mainly involved in the administration of the company, and
one trainer who, for family reasons, asked for employee status.
[12]
The following, also
from the testimony and documents submitted to evidence, would indicate the
existence of a relationship of subordination between the appellant and the
worker:
(a) on September 18, 2003,
the worker entered into an agreement that included non‑solicitation and
confidentiality clauses and clauses regarding the ownership of intellectual
property rights developed or created while carrying out his work;
(b) the appellant received
a copy of the student evaluations at the end of each session, in accordance
with the Emploi-Québec requirements;
(c) in accordance with the
Emploi-Québec requirements, the worker was to give the appellant his attendance
sheets at the end of each session, to indicate the duration of the training,
the students who participated and the success rate of the courses;
(d) the worker
participated in the training workshops for new trainers given by the appellant,
and a few other sessions after that; during the period in question, he attended
three workshops and was paid for his time there, at a rate of $8 an hour;
(e) the appellant
reimbursed certain expenses, such as transportation and parking.
[13]
The worker claimed
employee status with the appellant after ending his business relationship with
the appellant in August 2005. He was a founding member of the Coopérative
linguistique du Québec, a new coop of workers offering English as a second
language courses to businesses, and also translation services. This new coop
began operating in September 2006.
[14]
The appellant was very
conscious of the significance of the tax status of the trainers and, without
exception, solely dealt with people who agreed to be self‑employed
workers. Moreover, one of the appellant's workshops was specifically on the
taxation of self-employed workers. The fact the worker had registered a
corporate name in February 2002 and asked for the payment of his invoices to be
deposited to his company's bank account clearly shows, in my opinion, that he
had accepted his status as a self-employed worker.
[15]
In regard to the
concept of "control", the important factor is not determining the
extent of the actual control exerted but the power of control the appellant has
over the worker, as described in 9041-6868 Québec Inc. v. Canada, 2004
TCC 648. In the present case, it is quite clear that the appellant did not
exercise control over the worker. The issue is whether the appellant had the
right to exercise such control over the worker. According to the parties'
respective obligations, I do not believe the appellant had the ability or power
to control the worker. What control could a company really exercise over a
worker who could, at any time and with no advance notice, end the business
relationship? If the appellant had control, it would be a control over the work
results, not over the worker or the execution of the worker's duties as a
trainer. Moreover, as Létourneau J.A. of the Federal Court of Appeal stated at
paragraph 16 of Poulin v. Canada, 2003 FCA 50, even contracts for
services are subject to some type of control:
…the notion of control is not necessarily lacking in the contract
for service.
…
The work performed by contract for services is also subject to some
performance, productivity and quality controls.
[16]
As for the criteria
stated by the Federal Court of Appeal in Wiebe Door Services Ltd. v. M.N.R.,
87 DTC 5025, namely the degree or lack of control the appellant exercised, the
ownership of the work tools, the chance of profit and risk of loss and the
integration of the worker in the appellant's business, these criteria are not
of great use in this case. The concept of control was reviewed in the preceding
paragraphs; the ownership of the tools required to carry out the work is not
very relevant considering the nature of the services rendered, the needs met
and the few work tools used; the chance of profit and risk of loss are almost
nonexistent and the integration in the business activities is relied on less
and less considering workers' specializations.
[17]
For these reasons, I
find that the worker did not hold insurable employment with the appellant for
the relevant period. I must state, however, that each case in this matter is a
specific case, and a decision on the status of the worker does not necessarily
mean the appellant's other workers have the same status as that of the worker.
[18]
Accordingly, the appeal
is allowed.
Signed at Ottawa, Canada,
this 25th day of September 2008.
"Réal
Favreau"
Translation
certified true
on this 5th day of
July 2010.
Elizabeth Tan,
Translator
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