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Citation: 2005TCC328
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Date: 20050627
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Dossier: 2003-4188(EI)
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BETWEEN:
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JEAN-YVES VAILLANCOURT,
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Appellant,
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and
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THE MINISTER OF NATIONAL REVENUE,
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Respondent,
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and
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FONDATION QUÉBÉCOISE DE LA
DÉFICIENCE INTELLECTUELLE,
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Intervenor.
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[OFFICIAL ENGLISH
TRANSLATION]
REASONS FOR JUDGMENT
(Delivered orally from the bench on September 1, 2004,
at Montréal, Quebec and amended for clarification and
precision.)
Archambault
J.
[1] Jean‑Yves Vaillancourt is
appealing from a decision by the Minister of National Revenue (Minister)
regarding the insurability of his employment with the Fondation québécoise de
la déficience intellectuelle (Foundation) for the period of May 27 to
December 31, 2002 (relevant period). Mr. Vaillancourt is contesting the
Minister's decision that, during this period, he was not engaged in insurable
employment under the Employment Insurance Act, S.C. 1996, c. 23
(Act) because, in his opinion, he was hired under a contract of
employment. The Minister feels that Mr. Vaillancourt's services were
rendered under a contract for service, as a "self-employed worker,"
the term commonly used.
Facts
[2] The evidence showed
the following. First, at the beginning of the hearing, Mr. Vaillancourt admitted all the facts stated
in paragraph 7 of the Minister's Reply to the Notice of Appeal, except for
those in subparagraphs 7(f) and 7(l). I will reproduce the subparagraphs
here:
(a) The Payer had
been operating a used-article collection company since August 17, 1988;
(b) the Payer had a
place of business in Montréal and another one in Gatineau, and hired around 110 people;
(c) the Payer wanted
to develop a new project with collection boxes for clothing and various
articles at grocery stores, convenience stores and drug stores;
(d) on May 27, 2002,
it hired the Appellant as project manager for this new project;
(e) a one-year
agreement was signed between the parties to this effect;
(f) the signed
agreement stated that the Appellant was hired as a self‑employed worker
and his duties were to:
— Develop a new
project to install collection boxes for clothes.
— Prepare a flyer.
— Go to various
businesses.
— Sign agreements
with business people to install 80 collection boxes in Montréal and 16 in the
Outaouais.
— Provide services to
the Payer for more or less 40 hours per week;
(g) during the first
two months of the agreement, the Appellant worked in the Payer's office and
then he worked mainly on the road;
(h) the Appellant
could use an office and any equipment needed for his work, provided by the
Payer;
(i) the Payer
provided a cell phone and business cards for the Appellant;
(j) all the costs
incurred by the Appellant, including vehicle expenses, were reimbursed by the
Payer;
(k) the Appellant
received a set pay of $1,346.15 every two weeks, upon presentation of an
invoice, required by the Payer;
(l) starting January
1, 2003, the parties amended their agreement and the Appellant became the
Payer's employee;
(m) on January 21,
2003, the Payer issued a record of employment in the Appellant's name
indicating the first day of work as January 1, 2003, the last paid day as
January 20, 2003, 91 insurable hours and a total insurable pay of $1,750.
[3] As for
subparagraph 7(f), the only part that caused a problem for
Mr. Vaillancourt was the mention of a "flyer". However, the
evidence showed that, although not strictly speaking a flyer, a promotional
document was, in fact, created and produced. As for subparagraph (l), I agree with
Mr. Vaillancourt that the evidence shows the parties did not amend their
May 27, 2002, agreement. It shows that they undertook negotiations towards the
end of December 2002 and in January 2003 to replace it with a contract of
employment, but one of the essential elements of a contract of employment—the
power of direction and control that the Foundation could exercise over
Mr. Vaillancourt's work—caused a problem. In fact, Mr. Vaillancourt
never accepted the Foundation's intention to exercise strict control over his
work.
[4] I agree with
Mr. Vaillancourt that the
degree of control Mr. Boily wanted to exercise seems quite strict, if not
extreme, but this is not the issue. Whether justified or not is irrelevant.
That issue stems from the contractual freedom of the parties. In fact,
Mr. Vaillancourt could have refused to have such a control exercised over
him and this is what he did. That is why there was never an agreement to
replace the original agreement. As a result, it is incorrect to claim, in
subparagraph 7(l) of the Reply to the Notice of Appeal, that Mr. Vaillancourt
became an employee as of January 1, 2003. The fact that the terms of payment
changed, in particular the fact that source deductions had begun, is not a
decisive element for the existence of a contract of employment. It is merely an
indication that the Foundation believed in the existence of a contract for
employment starting in January 2003.
[5] Since there was no
agreement to amend the original agreement, I think the existing contractual
relationship of May 27, 2002, continued after December 31, 2002. However, this
is all theoretical since the relevant period ended December 31, 2002. What must
be determined is the actual nature of the relationship between
Mr. Vaillancourt and the Foundation during the relevant period. Was it a relationship between client and
service provider (self-employed worker) or a relationship between employer and
employee? In other words, was there a contract of employment or a contract for
services?
[6] At the hearing,
Mr. Vaillancourt produced extensive documentary evidence that was exceptionally
well presented. His many documents are distributed in four collections. In the
fourth, one of the things at Tab 2, is the May 27, 2002, agreement that
describes the terms of the Foundation's hiring of Mr. Vaillancourt and in
which Mr. Vaillancourt is described as the Project Leader. I will
reproduce some of the more important parts of this agreement:
[translation]
PREAMBLE
WHEREAS the Project Leader
presented the Foundation with an offer of services on May 13, 2002,
regarding the development of the Foundation's business;
...
THE PARTIES AGREE AS
FOLLOWS:
1 PURPOSE
The Foundation retains
the services of the Project Leader as a subcontractor in charge of
business development.
2 Term
(a) This
agreement, for a maximum term of one year, takes effect on May 27, 2002,
and will end on May 26, 2003 at the latest.
(b) The
Foundation can end this agreement at any time by sending a written notice to
this effect, in which case the agreement is terminated upon reception of the
notice by the Project Leader.
3
REPRESENTATIONS BY THE PROJECT LEADER
(a) The
Project Leader guarantees the Foundation that he has the experience, knowledge
and resources required to ensure the services rendered to the Foundation.
(b) The
Project Leader guarantees the Foundation that he has read this agreement, is
satisfied with and will respect it.
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CONSIDERATION
(a) For
the services rendered by the Project Leader under this agreement, the
Foundation will pay him a fee of $1,346.15 (excluding applicable
taxes — GST and QST) every two weeks, for more or less 40 hours/week based
on a flexible schedule.
(b) The
fees will be paid to the Project Leader upon presentation of an invoice
every two weeks addressed to the Foundation (c/o the Director General) to
the above address that presents a brief summary of the duties accomplished,
the time allotted to them, the amount of the fees due for the period in
question[,] the calculation of applicable taxes and the Project Leader's GST
and QST numbers.
(c) The
Project Leader will be reimbursed for travel expenses in accordance with
the rate established by the board of directors.
The Project Leader will
be reimbursed for actual expenses preauthorized by the Director General, upon
presentation of supporting documents.
The Project Leader will
present a monthly claim for the amounts mentioned in the preceding paragraphs.
5 RELATIONSHIP
BETWEEN THE PARTIES
(a) The
Project Leader will act as an independent contractor at all times and there
is no employment relationship between the Foundation and the Project
Leader.
...
(c) The
Project Leader is the sole person responsible for any act carried out or
omission that may arise when carrying out his obligations under this
agreement and for any damages, of any type, that may arise for the Foundation
or third parties, except where this act or omission is fully imputable to the
Foundation.
(d) The
Project Leader indemnifies the Foundation, and any employees, agents or
insurers of the Foundation, of any claim, penalty or prosecution
resulting from an act or omission for which he is responsible that is committed
or which arises under this agreement or is related to it in any way.
6
VARIA
...
(c) This
agreement is governed by the legislation of the Province of Quebec.
[Emphasis added.]
[7] In accordance with
the May 27, 2002, agreement, every two weeks Mr. Vaillancourt presented an
invoice addressed to the Foundation with a brief summary of the duties
accomplished. As an example, I will reproduce the first invoice, covering the
period of May 27 to June 7, 2002, and the last, covering the period of December
23 to December 31, 2002:
[translation]
Invoice No.: 20001 June
10, 2002
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Jean-Yves
Vaillancourt
300 rue
Saint-Georges, apartment 600
Saint-Lambert,
Que J4P 3P9
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Fee: May 27 to May 31, 2002, and
June 3 to June 7, 2002
GST number: 144526142
7%
QST number: 1087758334TQ0001 7.5%
Services rendered to:
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$1 346.15
$94.23
$1 440.38
$108.03
$1 548.41
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FQDI
La Fondation québécoise de la déficience
intellectuelle
3958 rue Dandurand
Montréal, Que H1X 1P7
Jacques Boily – Director General
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Brief description of services
rendered:
1. Preparation of a draft
portfolio
2. Partial market and competition
analysis
3. Draft partnership agreement
4. Support and introduction to
storage
5. Introduction to collection
Total fees:
Total GST and QST:
Total fees including GST and QST:
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$1 346.15
$202.26
$1
548.41
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Amount
payable immediately upon receipt of this invoice
Invoice No.: 20016 December
31, 2002
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Jean-Yves
Vaillancourt
300 rue
Saint-Georges, apartment 600
Saint-Lambert,
Que J4P 3P9
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Fee: December 23 to 27, and December
30 to 31, 2002
GST number: 144526142 RT 7%
QST number: 1087758334TQ0001 7.5%
Services rendered to:
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$942.27
$65.96
$1 008.23
$75.62
$1 083.85
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FQDI
La Fondation québécoise de la déficience
intellectuelle
3958 rue Dandurand
Montréal, Que H1X 1P7
Jacques Boily – Director General
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Brief description of services
rendered:
1. Business development plan
Total fees:
Total GST and QST:
Total fees including GST and QST:
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$942.27
$141.58
$1
083.85
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Amount
payable immediately upon receipt of this invoice
[8] Moreover, in
accordance with the Agreement, Mr. Vaillancourt presented twice-monthly
expense reports with supporting documents, regarding his travel expenses.
Analysis
[9] The issue in this
case is whether Mr. Vaillancourt
held insurable employment under the Act. The relevant provision is
paragraph 5(1)(a) of the Act, which states:
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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;
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5. (1) Sous réserve du paragraphe (2),
est un emploi assurable :
a) l'emploi
exercé au Canada pour un ou plusieurs employeurs, aux termes d'un contrat
de louage de services ou d'apprentissage exprès ou tacite, écrit ou
verbal, que l'employé reçoive sa rémunération de l'employeur ou d'une autre
personne et que la rémunération soit calculée soit au temps ou aux pièces,
soit en partie au temps et en partie aux pièces, soit de toute autre manière;
[Emphasis added.]
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[10] This paragraph
defines insurable employment as employment under a contract of service (which
is a synonym for contract of employment).
However, the Act does not define such a contract. As Mr. Vaillancourt's
May 27, 2002, contract is governed "by the legislation of Quebec" and the contract for services is a
civil law concept found in the Civil Code of Quebec (Civil Code),
it is under the relevant provisions of the Civil Code that the nature of this
contract must be determined. For any employment period post May 30, 2001, this
is the procedure courts must follow since the coming into force on June 1,
2001, of section 8.1 of the Interpretation Act, R.S.C. 1985, c. I‑21,
amended. This section states:
[11] The most relevant
provisions for determining whether a contract of employment exists in Quebec,
to distinguish it from a contract for services are articles 2085, 2086, 2098 and 2099 of the
Civil Code:
Contract of employment
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.
2086 A contract of employment is for
a fixed term or an indeterminate term.
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Contract of enterprise or for services
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.
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.
[Emphasis added.]
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[12] Upon analysis of
these provisions from the Civil Code, it is clear that there are three
essential conditions for a contract of employment to exist: (i) provision in the form or work
provided by the worker; (ii) remuneration for this work by the employer;
and (iii) a relationship of subordination. A significant distinction
between a contract for service and a contract of employment is the existence of
a relationship of subordination, meaning the employer has the power of
direction or control over the worker.
[13] In academic
literature, authors have considered the concept of "power of direction or
control" and its flip side, the relationship of subordination.
Robert P. Gagnon states :
[translation]
(c) Subordination
90 – A distinguishing factor – The
most significant characteristic of an employment contract is the employee's
subordination to the person for whom he or she works. This is the
element that distinguishes a contract of employment from other onerous
contracts in which work is performed for the benefit of another for a
price, e.g. a contract of enterprise or for services governed by
articles 2098 et seq. C.C.Q. Thus, while article 2099 C.C.Q provides
that the contractor or provider of services remains "free to choose the
means of performing the contract" and that "no relationship
of subordination exists between the contractor or the provider of services and
the client in respect of such performance," it is a characteristic of an
employment contract, subject to its terms, that the employee personally
perform the agreed upon work under the direction of the employer and within
the framework established by the employer.
. . .
92 – Concept – Historically, the
civil law initially developed a "strict" or "classical"
concept of legal subordination that was used for the purpose of applying
the principle that a master is civilly liable for damage caused by his servant
in the performance of his duties (article 1054 C.C.L.C.; article 1463 C.C.Q.).
This classical legal subordination was characterized by the employer's
direct control over the employee's performance of the work, in terms of the
work and the way it was performed. This concept was gradually relaxed,
giving rise to the concept of legal subordination in the broad sense.
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.
[15] In my opinion, the
rules governing the contract of employment in Quebec law are not identical to
those in common law and as a result, it is not appropriate to apply common
law decisions such as Wiebe Door Services Ltd. v. M.N.R., [1986]
3 F.C. 553 (F.C.A.) and 671122 Ontario Ltd. v. Sagaz Industries Canada
Inc., [2001] 2 S.C.R. 983, 2001 SCC 59.
In Quebec,
a court has no other choice but to decide whether a relationship of
subordination exists or not to decide whether a contract is a contract of
employment or a contract for service.
[16] The approach
to take is the one adopted by, among others, Létourneau J. of the Federal Court
of Appeal,
who, in D & J Driveway Inc. v. Canada, (2003), 322 N.R. 381, 2003
FCA 453, found that there was no contract of employment by using the
provisions of the Civil Code as a basis and, in particular, by noting the
absence of a relationship of subordination, a relationship that "is the
essential feature of the contract of employment."
[17] We shall apply these
rules to the appeal at bar. First, it must be noted that the written agreement
clearly describes the nature of the contract, it is a contract for service, and
not a contract of employment. The intention of the parties is clear:
Mr. Vaillancourt was to provide his services as an "independent contractor
and there is no employment relationship between the Foundation and the Project
Leader" (subparagraph 5(a) of the agreement). According to the
content of the written agreement, it is clear that the Foundation had no power
of direction and control since Mr. Vaillancourt was to carry out his work
"as an independent contractor."
[18] However, the courts
have refused to rely solely on the qualification or distinction the parties
give to their agreements. The agreement's conformity with the provisions of the
Civil Code must be verified by carefully reviewing the way in which the
contract was performed. Létourneau J., in D & J Driveway, stated:
2 It should be noted at the outset that the parties'
stipulation as to the nature of their contractual relations is not necessarily
conclusive and the Court which has to consider this matter may arrive at a
contrary conclusion based on the evidence presented to it: Dynamex Canada Inc.
v. Canada, [2003] 305
N.R. 295 (F.C.A.). However, that stipulation or an examination of the
parties on the point may prove to be a helpful tool in interpreting the nature
of the contract concluded between the participants.
[Emphasis
added.]
[19] In Wolf v. Canada,
[2002] 4 F.C. 396, 2002 DTC 6853, [2002] 3 C.T.C. 3, 2002 CFA
96, Décary J. expanded on this and stated:
119 Taxpayers may arrange their affairs in such
a lawful way as they wish. No one has suggested that Mr. Wolf or Canadair or
Kirk-Mayer are not what they say they are or have arranged their affairs in
such a way as to deceive the taxing authorities or anybody else. When a
contract is genuinely entered into as a contract for services and is performed
as such, the common intention of the parties is clear and that should be the
end of the search...
[Emphasis added.]
[20] As a result, the
deciding issue in Mr. Vaillancourt's appeal is whether the contract for
service was performed as such. It must be determined that there was no
relationship of subordination between Mr. Vaillancourt and the Foundation
regarding the performance of the contract, meaning Mr. Vaillancourt did
not carry out his work under the direction or control of the Foundation.
[21] I have listened
attentively to all the testimony presented, in particular by
Mr. Vaillancourt and Mr. Boily, who was the Foundation's Director
General, and I find that the Foundation did not exercise control over
Mr. Vaillancourt in the performance of his duties.
[22] Mr. Boily, a CGA, is an experienced
person. He seemed well aware of the distinction between a contract of
employment and a contract for service. For there to be a contract for
service—as opposed to a contract of employment—he could not exercise control
over Mr. Vaillancourt and this is what he did. He left
Mr. Vaillancourt the freedom to choose the means to carry out the contract
and did not try to exercise control over its performance.
[23] Mr. Boily's
testimony on this subject was supported by Mr. Vaillancourt's own
testimony. He admitted that he agreed to be hired as a self-employed worker. He
also admitted that he had absolute independence. He determined his own hours of
work and the businesses he would approach in carrying out his contract. Being a
conscientious man, Mr. Vaillancourt spent the 40 hours per week for which
he was paid working, in accordance with his contract. He did all he needed to
to develop new business and perform the contract he was offered. He even stated
that he was the one who decided to undertake negotiations with owners of
convenience stores because there was an interesting potential for developing
new business there.
[24] However, when he
became aware of the tax consequences of his contractual relationship with the
Foundation, namely that he would have to make higher social contributions (in
particular to the Québec Pension Plan), which would not be the case if he were merely a paid worker,
Mr. Vaillancourt pushed Mr. Boily to grant him a contract of
employment rather than a contract for service, from that time on. Since the
contract for service had just recently been signed, Mr. Boily did not want
to go before his board of directors again to modify the agreement with
Mr. Vaillancourt. He informed Mr. Vaillancourt that he would have to
prove himself first and, in a way, earn the change in contract.
[25] Very satisfied with
Mr. Vaillancourt's services, toward the end of 2002, Mr. Boily
proposed a contract of employment to Mr. Vaillancourt with conditions that
seemed to Mr. Vaillancourt to be completely unacceptable. The Foundation
wanted to exercise very strict control over his activities, in particular, he
would have to produce weekly detailed reports indicating the times of the
visits, their duration, and the content of discussions between
Mr. Vaillancourt and the Foundation's potential partners, among other
things. For Mr. Vaillancourt, this requirement for control was equivalent
to a flagrant lack of confidence in his integrity. To him, it was unreasonable
and he therefore refused the contract of employment project.
[26] When he signed the
May 27, 2002, agreement, Mr. Vaillancourt knew very well that he had not been hired as an employee.
Therefore, I could only have intervened and concluded that a contract of employment
existed if, as I mentioned during the oral argument, I had been convinced that
the parties did not act in accordance with the terms of the contract they had
signed. However, the evidence does not show that the Foundation exercised
sufficient direction or control over Mr. Vaillancourt for the contract to
no longer reflect reality. I have no other choice but to find that there was no
contract of employment between Mr. Vaillancourt and the Foundation during
the relevant period. For these reasons, Mr. Vaillancourt's appeal is
dismissed.
Signed at Magog, Quebec, this 27th day of June 2005.
Archambault
J.
Translation
certified true
on this 28th day of
October 2005.
Elizabeth Tan,
Translator
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