Citation: 2008TCC86
Date: 20080220
Docket: 2007-3344(EI)
BETWEEN:
ENRICO DUQUET,
Appellant,
and
THE MINISTER OF NATIONAL REVENUE,
Respondent.
[OFFICIAL ENGLISH
TRANSLATION]
REASONS FOR JUDGMENT
Tardif J.
[1] This is an appeal
concerning the insurability of the work done by the Appellant during the period
from January 1 to December 31, 2005. The alleged employer is Centre
Autoson Inc.
[2] In order to explain
and justify his decision, the Respondent relied on the following assumptions of
fact:
[TRANSLATION]
(a) The Payor,
which incorporated on August 16, 2000, operates a business that sells
and installs automobile parts and accessories. (admitted)
(b) The Payor's
shareholders were:
- Mario
Roberge, with 75% of the shares,
- Christine
Roberge, with 25% of the shares. (admitted)
(c) In June 2004, the
Appellant was hired by Mr. Roberge as a sales clerk. (admitted)
(d) The Appellant's
duties were those of a manager: he ordered the parts, sold car radios and
remote starters, answered the telephone, and even issued invoices. (admitted)
(e) The Appellant
worked in the Payor's garage, and, at the time that the Appellant was hired,
both parties acknowledged him to be an employee of the Payor. (admitted)
(f) On January 11, 2005, the Appellant decided to start his own business
under the name "Rico Distribution" (admitted)
(g) The principal
activity of the Appellant's business was to sell motor oil for a company called
Torco. (denied)
(h) The Appellant
was a Torco representative at the time, and the Payor was one of his customers.
(denied)
(i) The Appellant
got the Payor's permission to store his oil in one of his small warehouses in
exchange for the performance of services, which consisted of a few
installations of accessories. (denied)
(j) A few weeks
after his business started, the Appellant, who was not earning enough income at
the time, offered to promote the Payor's products while visiting garages to
sell motor oil. (denied)
(k) Since the
Appellant was a good salesperson, the Payor agreed to hire him as a representative,
and a work contract between the Payor and Rico Distribution
(a business owned solely by the Appellant) was signed. (denied)
(l) The agreement, which was signed on April
18, 2005, specified that Rico Distribution would be responsible for
managing the store, working as a sales representative on the road, and,
occasionally, installing car audio equipment and performance parts. (denied)
(m) The agreement specified that the Payor
would pay the Appellant a wage of $15.00 per hour or $600 per week (for 40
hours) through Rico Distribution. (denied)
(n) In January
2005, the Appellant, despite registering his business, remained employed by the
Payor for several weeks under the same terms and conditions as the initial
agreement. (denied)
(o) In April, the Appellant started to get
paid by the Payor, through the Appellant's business, as an independent
contractor. (admitted)
(p) The Payor agreed to pay the Appellant as
an independent contractor, upon submission of invoices, in exchange for his
performing a significant proportion of the duties that he had earlier performed
as a salaried employee. (denied)
(q) The agreement of April 8, 2005, specified that the Appellant
would continue to look after the management of the Payor's store and the
installation of equipment in the interests of the Payor, not in his own
interests or those of his business. (denied)
(r) Throughout the period in issue, the
Appellant received fixed remuneration of $600 per week from the Payor for
40 hours of work. (denied)
(s) Throughout the period in issue, the Payor
could give instructions to the Appellant and could require him to work 40 hours
per week for his pay, and verify this. (denied)
(t) The Appellant had to report to the Payor,
which could terminate his job and actually did so at the end of the period in
issue. (denied)
(u) To replace the Appellant, the Payor hired
someone as a salaried employee. (admitted)
(v) The facts show
that, despite forming his own business, the Appellant continued to render the
same services to the Payor as when he was considered a salaried employee of the
Payor. (denied)
(w) Despite the
intention expressed by the parties upon signing the agreement of April 18,
the services rendered by the Appellant fulfilled the criteria of a contract of
employment. (denied)
[3] After being sworn
in, the Appellant admitted to subparagraphs (a) to (f), (o) and (u); he denied
subparagraphs (g) to (n), (p) to (t), (v) and (w).
[4] After being
explained all the parameters of this dispute at length, especially the distinctions
between a contract of employment and a contract of enterprise, the Appellant
provided the Court with the facts on which he was relying to conclude that the
determination was unfounded.
[5] The Appellant
admits that the work that he did from January 1 to April 15 was under a
contract of service.
[6] With respect to the
period subsequent to April 15, he explained that his availability was limited
because of the work and energy devoted to developing Rico Distribution, the
business that he had created.
[7] He explained that
he appreciated the cooperation of the boss of Centre Autoson Inc., who
agreed, at the time, to continue giving him work because the business he had
created was not going as well as he had expected.
[8] Since his
availability was reduced, he could not follow the same strict work schedule as
punctually or exactly, so he ended his employment contract, and therefore,
according to his explanation, ceased to be a salaried employee as of April 16, 2005.
[9] Since he had to
split his time between his employer and his new business, the relationship
deteriorated somewhat, and, as a result, he notified his employer that he would
be leaving his employment. At that time, the Appellant and his business entered
into a new agreement with the employer, set out in a document (Exhibit I‑1)
that states as follows:
[TRANSLATION]
April 18, 2005
Subcontract
A subcontract between Rico Distribution
and Centre Autoson Inc. has been agreed upon for an indeterminate period
commencing April 2005. The responsibilities of Rico Distribution shall
be store management, sales representation on the road, and occasional
installation of car audio equipment and performance parts. The salary agreed
upon by the parties is $15.00 per hour, or a fixed payment of $600.00 per week.
_______________________________ ________________________
Signature of Subcontractor
(Rico Distribution) Signature of Employer
18/04/05 18/04/05
date date
[10] Thus, following
discussions, the parties came to an agreement and defined the parameters of
their contract, which they signed, and which was tendered as Exhibit I‑1.
[11] In practice, there
were a few changes, notably with regard to the hours during which the services
were to be performed. In addition, the Appellant was asked to train an employee
who was, in theory, hired to replace him. In a sense, the subcontract
is essentially a new agreement that is more flexible with respect to the time
that the hours of work are to be provided, although certain duties, including
training, were added.
[12] The Appellant said
that he repudiates the subcontract document (Exhibit I-1) and that several
documents confirming and validating it were mistakes that stemmed from his lack
of experience.
[13] The evidence
disclosed that changes began in January, but were more fully implemented as of April.
[14] At the time, the
Appellant, relying on statements by Louise Roberge, concluded that his employee
status was ending. Ms. Roberge gave him information, but clearly put him
on the wrong path by telling him that the fact that he would be paid fees
instead of a wage meant that he was self-employed.
[15] Louise Roberge testified.
She clearly had a very precise idea of what an employment relationship entails.
In her view, self-employed status means that fees are paid and that there are
no withholdings or contributions, whereas employee status entails withholdings,
contributions and a salary.
[16] The Respondent
produced a series of invoices (Exhibit I‑2) which show the new way
in which the Appellant was paid for his services.
[17] The invoices in
question are numbered consecutively from 24 to 40. The 17 invoices all report
40 hours of work at $15 per hour for a total of $600, plus GST and QST.
[18] Citing these factors,
the Appellant and his witness repeatedly asserted that the work was no longer
that of an employee, but rather that of a consultant retained as an independent
contractor, because it was no longer a salary that was being paid, but rather fees
plus GST and QST.
[19] Unfortunately, this
interpretation is very widespread but is not consistent with the provisions of
the Employment Insurance Act. The contract can be a relevant factor in
determining the nature of a working relationship between two parties. However,
the parties' intentions are based on their knowledge and perceptions, which are
not necessarily correct. Consequently, it is important to take into account the
contract between the parties, and their intention, but, beyond all that, the
manner in which the disputed work was performed remains the fundamental
reference point in determining the nature of a contract.
[20] The description of
the work, the way in which it is performed, the manner in which it is
remunerated, and, above all, the hows and whys of the communication and relationship
between the parties are the true factors that must be taken into consideration.
If everything is consistent and coherent with the contents of the agreement,
there is no problem, but a contract the contents of which are not consistent
with all the elements constituting the manner in which the work was performed
cannot be part of the analysis.
[21] In the case at bar,
the disputed work was indeed changed — specifically, as of April.
The purpose of these changes was primarily to help the Appellant, who had
started up a new business that was not producing the hoped-for results as quickly
as expected.
[22] The changes in
question pertained mainly to the work schedule, but also in part to the contents
of the contract.
[23] The Appellant
continued to perform many of the tasks that he had performed before the April
agreement was signed, but he also looked after the training of a new employee,
within a framework that was more flexible in terms of when the tasks had to be
performed. He was paid a fee even though it was essentially a wage of $15 per
hour for 40 hours a week; the big difference was that the work was done within
a more flexible framework.
[24] There is no doubt
that the changes that were made did not in any way alter the relationship of subordination
that had existed up to that time, and whose existence was in fact admitted to
and acknowledged by the Appellant up to April 16.
[25] The changes to the
mode of remuneration (invoice, GST and QST, that is to say, a fee instead of a
wage) did not affect the relationship of subordination, let alone cause it to
disappear.
[26] The employer clearly
needed the Appellant's services, and the Appellant needed work because his new
business was not generating sufficient income.
[27] Poorly advised and
misinformed, the Appellant thought that he was doing the right thing when he
modified the mode of remuneration, and he believed that this would be
sufficient to change his status from that of an employee to that of an
independent contractor. The evidence has established, on a balance of
probabilities, that the work continued to be done within an employer-employee
relationship even though there was more flexibility with respect to the time when
the remunerated work was to be performed.
[28] For these reasons,
the appeal must be dismissed, and the determination, being well-founded in fact
and law, is confirmed.
Signed at Ottawa, Canada, this
20th day of February 2008.
"Alain Tardif"
Translation
certified true
on this 7th day of
April 2008.
Brian McCordick,
Translator
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