Citation: 2005TCC281
Date: 20050518
Docket: 2004-3029(EI)
BETWEEN:
GILBERT TOUCHETTE,
Appellant,
and
THE MINISTER OF NATIONAL REVENUE,
Respondent,
AND
2004-3275(EI)
YVON CHARBONNEAU,
Appellant,
and
THE MINISTER OF NATIONAL REVENUE,
Respondent,
AND
2004-3726(EI)
GUY RUEL,
Appellant,
and
THE MINISTER OF NATIONAL REVENUE,
Respondent,
AND
2004-3926(EI)
CANADA WIDE LOCOMOTIVE INDUSTRIES LTD.,
Appellant,
and
THE MINISTER OF NATIONAL REVENUE,
Respondent,
and
CAROL VINCENT HAREWOOD,
Intervenor.
REASONS FOR JUDGMENT
Savoie, D.J.
[1] The appeals were
heard in Montreal, Quebec, on March 11,
2005.
[2] The Appellants are appealing
a decision of the Minister of National Revenue (the "Minister")
wherein he informed them by letters dated July 6, 2004 that Guy Boudreau, Yvon
Charbonneau, Pierre Descent, Catherine Manconi, Gilles Paquette, John
Redhead, Guy Ruel, Gilbert Touchette and Carol Vincent, the workers, held
insurable employment while providing services to Canada Wide Locomotive
Industries Ltd., the Appellant, from January 1, 2003 to February 20, 2004, the
period under review.
[3] In reaching his decision,
the Respondent, the Minister, relied on the following assumptions of fact. At
the hearing, on motion by the Respondent, granted by this Court, the Respondent
filed with the Court an amended Reply to the Notice of Appeal. The position
taken by the Respondent and his assumptions of fact will be read from this
amended document.
a) the Appellant incorporated on February 21,
2001, provided repairs and maintenance services for railroads and other
business associated with the railroad industry; (admitted)
b) Mr. Manconi was the sole shareholder of
the Appellant; (admitted)
c) the Appellant operated its business all
year long; (denied)
d) the Appellant had a repair shop at 155, Montreal-Toronto St. in Lachine;
(admitted)
e) the Appellant receives its contracts from
railway companies such as C.P. Rail, Ottawa Central, New Brunswick East
Coast, St-Laurent Atlantic; (admitted)
Guy Boudreau,
Yvon Charbonneau, Pierre Descent, Gilles Paquette, John Redhead, Guy Ruel,
Gilbert touchette and Carol Vincent
f) the Appellant hires, on an on-call basis, workers such as
mechanics or electricians to work on the locomotives; (denied)
g) the Workers hired by the Appellant are retired employees
who have already worked in this domain; (denied)
h) the Workers were called (2 or 3 days in advance) by the
Appellant to repair locomotives in the payer's shop and occasionally in Ottawa;
(denied)
i) the Workers had to respect a variable timetable agreeing
with the payer's needs; (denied)
j) they had to do the work at the Appellant's shop or at the
Appellant's client and according to the Appellant's specifications: (denied)
k) when they went to Ottawa, the Workers traveled with other
employees of the Appellant; (denied)
l) when they had to go to Ottawa, the Appellant paid for the
motel and displacement expenses of the Workers; (denied)
m) the Workers were paid on an hourly basis; they were paid
from the time they left home until the time they returned home; (denied)
n) the Workers were remunerated by cheque on presentation of
an invoice to the Appellant; (admitted)
o) the Workers did not incur any risk of loss because they
were remunerated for hours worked and did not incur any expenses in the
carrying out of their work; (denied)
p) tasks of the Workers were integrated into the payer's
activities; (denied)
Catherine Manconi
q) Catherine Manconi is the sister of Mike Manconi;
(admitted)
r) the Worker was hired as a secretary; (denied)
s) the Worker began working for the Appellant in 2001;
(admitted)
t) the Worker's duties consisted of answering the phone,
billing, bookkeeping, accounting; (denied)
u) the Worker performed the vast majority of her tasks at the
Appellant's premises, and occasionally at home; (denied)
v) the Worker worked an average of 30 to 32 hours weekly;
(denied)
w) the Worker had a flexible timetable for completing her
tasks; (admitted)
x) the Worker was paid on a hourly basis by cheque on
presentation of an invoice to the Appellant; (denied)
y) the Worker was paid $15 per hour; (denied)
z) the Worker did not incur any risk of loss because she was
remunerated for hours worked and did not incur any expense in the carrying out
of her work; (denied)
aa) her tasks were integrated into the payor's activities. (denied)
[4] The evidence disclosed the following. Canada Wide
Locomotive Industries Ltd., the Appellant, was incorporated in 2001. This
company operates a repair and maintenance business for locomotives on a
year-long basis. Michael Manconi is its sole shareholder. He specialized in the
kind of business with his father.
[5] This is specialty work which requires skilled labour
in different trades associated with maintenance and repair of locomotives.
Since the Appellant does not have that kind of expertise on staff, it went
outside to find the skilled persons required to provide the repair and
maintenance work requested by its clients, railroad companies such as C.P.
Rail, Ottawa Central, New Brunswick East Coast, St-Laurent Atlantic, to name a
few.
[6] The Appellant's main operations are conducted at Lachine, Quebec, where 60% to 65% of the work is
carried out. The rest took place on site at either Ottawa or Hawkesbury, Quebec or certain locations in New Brunswick.
[7] When the Appellant received an order, it hired, on an
on-call basis, such skilled tradesmen as electricians, mechanics, brakemen (air
brakes), pipe fitters, etc. The Appellant, once it had established the nature
of the repair required, would call upon the worker whose specialty was involved
to do the necessary work.
[8] This worker, when called upon to affect the necessary
repairs, was free to accept or reject the offer, without any consequences
whatsoever. Once he accepted, he would be called upon to sign a Consultant
Agreement. This document was produced at the hearing (Exhibit A-1).
[9] It is significant to note that the Appellant could not
accept the client's work order prior to securing the worker's signature on the
Consultant Agreement. This skilled workforce is made up of retired C.N. or C.P.
employees.
[10] It must be noted also that the Consultant Agreement did
not link the workers to the Appellant exclusively. They were free to offer
their services elsewhere.
[11] On occasion, the work required that the workers travel
to different work sites. They had the freedom to choose their method of
transportation and if the nature of the work called upon a number of skilled
tradesmen, they sometimes traveled together. Their traveling expenses were
covered by the Appellant's clients. The workers were called by the Appellant
two or three days in advance.
[12] The evidence disclosed that the workers themselves
determined their hourly rate of pay. These varied from one trade to the other.
They also determined their availability for the job. These workers had their
own tools which they used in the exercise of their trade, some of these were of
particular use to their own trade. Gilbert Touchette spent $3,000 for his
tools, while Guy Ruel's tools cost him $1,500.
[13] Certain repair work required the skill of different
tradesmen. These people would often work together on the same project in their
specialty area, cooperating with one another while no one in particular was the
supervisor. The fact that worker Charbonneau might have been the Appellant's
supervisor on various jobs was very strongly denied by Mr. Charbonneau and all
the other workers who testified. In that regard, I have found their testimony
credible.
[14] Hotel expenses of the workers were usually paid by the
Appellant's clients, but with respect to meals, there was not set pattern.
Arrangements were made between the Appellant and the worker in each instance.
The worker sent invoices to the Appellant after the completion of the work, but
if the repairs were done over an extended period, they could send progress
billings. When asked to do certain work out of town, the workers determined
their availability and were not subject to any work schedule, but could perform
their services at the time of their choosing so long as they performed this
work within the working hours of the client or the Appellant at its shop in Lachine. Michael Manconi also denied that
the worker Charbonneau did any supervision of the other workers.
[15] The Appellant also established that the workers were
responsible for the specialty work they performed and that any defect which
occurred was not the Appellant's responsibility or liability. In other words,
the Appellant and the workers both established that the workers were fully
liable for the work they did.
[16] Furthermore, the workers were not subjected to any
schedule in regards to their work or their hours of work.
[17] The evidence disclosed that the workers would deduct
their work related expenses in the income tax returns.
[18] Catherine Manconi worked approximately four days per
week. She answered the Appellant's telephone. She also collected from the
various workers the list of materials they required for specific jobs to be
done for the Appellant's clients. This was then turned over to the Appellant. Additionally,
she did some billing and bookkeeping. The Appellant had its own accountant.
[19] She had no work schedule. She, like the other workers,
was on call. She could be off work for two weeks at a time. She averaged 35
hours of work per week. She was paid $15.00 per hour which she requested and
sent invoices for her work to the Appellant.
[20] The Minister takes the view that the workers were
subjected to a work schedule under the supervision of Yvon Charbonneau. Jacques
Rousseau, the appeals' officer, testified for the Minister.
[21] Mr. Rousseau compared the workers, who were on call, to
the situation of certain casual workers of businesses such as MacDonald's,
Burger King or hospitals, also on call, who are considered regular employees
nevertheless by the Employment Insurance Act. He also stated that in
conversations with witnesses and others, he had found out that the workers in
these appeals were supervised.
[22] Under cross-examination, however, it became clear that
Mr. Rousseau was unfamiliar with the work contracts for hospital workers and
had to admit that he never visited the worksite of the Appellant, could not
describe the work methods of the Appellant and was not able to compare the
broken shifts at Macdonald's or Burger King and the Appellant.
[23] For the purpose of this exercise, it will be useful to
have in mind the terms of the said Consultant Agreement (Exhibit A-1). The
Agreement provides as follows:
CONSULTANT
AGREEMENT
This
consulting agreement (agreement) is entered into effect as of Sept. 24/2001, by
and among CANADA WIDE LOCOMOTIVE INDUSTRIES LTD., a Quebec corporation
(hereinafter referred to as; "the company") and Catherine Manconi and
[sic] individual, residing at 136 Primeau, Chat, PQ. Quebec, Canada
(hereinafter referred to as; "the consultant").
Whereas, the
company is in the business (among other business) of providing services in all
areas related to related to railway operations for railroads and other business
associated to the railroad industry, and
Whereas, the
company feels it is desirable for the company to use the expertise of the
consultant in operating the business, and
Whereas, it is
the desire of the company to engage the consultant to perform consulting
services as an independent contractor and not as an employee. Therefore, the
company is in no such matter liable for any injuries or other wise damages that
may occur to the consultant or his personnel belongings, during the period
covered by this agreement, and
Whereas, the
consultant agrees to perform such services for the company at the price agreed
upon by the parties prior to each assignment, and
Whereas, the
parties recognize that the consultant has a great deal of experience,
knowledge, know-how and business relationships relating to the operation of the
business.
Now therefore,
for and in consideration of the mutual promise, covenants and agreements herein
set forth and other good valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties hereto agree as follows:
I. CONSULTING
SERVICES:
The consultant
will be called upon by the company to render advice and assistance to the
company regarding the business or any other business of the company, at the
consultant's residence or such other location designated by the consultant. The
consultant shall be empowered to do all things necessary to carry out the above
duties, but shall at no time and under any circumstances have the power to bind
the company to any agreements entered into by the consultant. The consultant
shall perform its duties hereunder as an independent contractor, and not as an
employee of the company.
Subject to the
limitations set forth in this agreement, the consultant agrees to fulfill his
commitment agreed to for each assignment.
II. EXPENSES:
When
authorized by the company, prior to any assignment, all travel, lodging and
meal expenses incurred by the consultant in connection with services performed
under this agreement, shall be paid by the company and any such expenses shall
be in addition to and shall not be deemed to be payments of, the consulting
fees (as hereinafter defined) payable to the consultant as described in
section IV of this agreement.
III. TERM:
The term of
this agreement shall be for a period of until further advised month(s),
commencing Sept. 24, 2001. However, the parties may terminate this agreement by
providing the other party a 15 day written notice of its intention to terminate
this agreement. Therefore, at the end of this 15 day period, both parties shall
be exempted from all obligations of this agreement.
IV. COMPENSATIONS:
As
compensation for the services rendered hereunder by the consultant, the company
shall pay the consultant a fee agreed upon prior to each assignment. The
consultant shall submit to the company a written report documenting the hours
worked and the work performed for each week. The company will pay the
consultant immediately following receipt of payment from the consignor business
or company.
V. OTHER
BUSINESS OR ACTIVITIES OF THE CONSULTANT:
It is
acknowledged by the parties hereto that the consultant may perform consulting
work for other companies. Nevertheless, except to the extent providing of
services would interfere with the instructions given by the company. The consultant
has the right to refuse any assignment. However, once the consultant agrees to
perform an assignment, the consultant will be obliged to fulfill his
commitment.
VI. EQUIPMENT:
The company
will pay any costs the consultant encounters while providing services
instructed by the company.
VII. TRADE
SECRETS:
The consultant
shall not divulge, publish, disclose, or otherwise reveal any of the trade
secrets, either directly or indirectly to any person, firm, corporation or any
third party, nor use them in any way, either during the term of this agreement
or at any time thereafter, except as required in the performance of services
hereunder.
All files,
records, documents, specifications, memoranda, notes and similar items relating
to the business of the company shall remain the exclusive property of the
company.
In witness
whereof, both parties hereto have solemnly agreed and executed this agreement
as of the day, month and year first above written.
CANADA WIDE
LOCOMOTIVE INDUSTRIES LTD.
By:
__________________________________________
Mike Manconi
President,
Canada Wide Locomotive Industries Ltd.
Signature:
_____________________________________
Print:
_________________________________________
Consultant.
[24] The Minister, relies on subsection 93(3) and on
paragraphs 5(1)(a), 5(2)(i), 5(3)(b) of the Employment
Insurance Act (the "Act") as applicable to the period in
question.
[25] The Minister has concluded that Guy Boudreau, Yvon
Charbonneau, Pierre Descent, Gilles Paquette, John Redhead, Guy Ruel, Gilbert
Touchette and Carol Vincent were engaged in insurable employment with the
Appellant for the period under review as they were engaged under a contract of
service within the meaning of paragraph 5(1)(a) of the Act during
the period under review.
[26] Furthermore, the Minister has concluded that Catherine
Manconi's employment was not excluded from insurable employment because the
terms and conditions of her employment would have been substantially similar if
she and the Appellant had been dealing with each other at arm's length. The
Minister concluded that Catherine Manconi was engaged in insurable employment
with the Appellant for the period under review as she was engaged under a
contract of service within the meaning of paragraph 5(1)(a) of the Act.
[27] Paragraph 5(1)(a) of the Act reads 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;
[28] The case of Wiebe
Door Services Ltd. v. Canada (Minister of National Revenue – M.N.R.) 87 DTC 5025 has
established a series of criteria for the determination of whether a contract
is one for services or one to be executed by an independent contractor. The
criteria are as follows:
a) The degree or absence of
control exercised by the so-called employer;
b) The ownership of the tools;
c) The chances for profit or
risks of loss;
d) The integration of the work
performed by the so-called employees within the enterprise of the employer.
Let us analyze the evidence under
the four criteria listed above.
I. CONTROL
[29] The factual
situation disclosed by the evidence has revealed that the workers were called
by the Appellant and offered to affect certain repairs to locomotives as
required by the Appellant's clients. They were called to find out whether or
not they accepted to do the repairs required. The workers were at liberty to accept
or to refuse to perform the required repair work. Their refusal of the offer
did not carry any consequences. If they accepted, they signed the Consultant
Agreement. The workers determined their own hourly rate for their services. The
workers also determined when they would attend to perform the services in
question, depending on the urgency of the matter.
[30] The Honourable Judge
MacGuigan at page 5027 of the Wiebe Door decision, supra,
reviewing the English and Canadian jurisprudence on the control test, stated as
follows:
The traditional common-law
criterion of the employment relationship has been the control test, as set down
by Baron Bramwell in R. v. Walker (1858), 27 L.J.M.C. 2207, 208:
It seems to me that the difference
between the relations of master and servant and of principal and agent is this:
A principal has the right to direct what the agent has to do; but a master has
not only that right, but also the right to say how it is to be done.
That this test is still fundamental is
indicated by the adoption by the Supreme Court of Canada in Hôpital
Notre-Dame de l'Espérance and Theoret v. Laurent et al., [1978] 1 S.C.R.
605, 613, of the following statement: "the essential criterion of
employer-employee relations is the right to give orders and instructions to the
employee regarding the manner in which to carry out his work.
[31] It would appear that
the working relationship between the workers and the Appellant, examined under
this criteria, as established by the evidence, supports the notion that the
workers were performing their services as independent contractors.
II. OWNERSHIP OF
THE TOOLS
[32] The evidence
disclosed that each worker carried his own toolbox. They had their own tools
which they used in the exercise of their trade. Some of these were of
particular use to their own trade. Gilbert Touchette for instance stated that
he paid $3,000.00 for his tools. Guy Ruel stated that his cost him $1,500.00.
The evidence is clear that the workers would use their own tools with the
exception of large tools, such as cranes, provided by the Appellant's client on
each worksite.
[33] Examined under this
criteria, the facts also support the notion that the workers were carrying out
their own private enterprise and offering their services as such to the
Appellant.
III. CHANCE OF PROFIT AND
RISK OF LOSS
1. The
Appellant was in a highly specialized type of business;
2. The
very nature of the work to be executed required that the worker travel to the
site of the locomotive in question, the site of the Appellant's client;
3. The
repairman in this highly specialized type of work is responsible for his
workmanship and if the quality of his work is defective, he has to correct the
mistakes made at his own cost;
4. As
compared to other industries, railroad companies are very rare;
5. Therefore,
this repair work, by its very nature, carries tremendous risk of loss should
the working hours and disbursements not be paid. The worker is carrying on his
own business of which he is the sole worker;
6. The
chance of profit depends on the volume of work received during a specified
period.
IV. INTEGRATION:
[34] It has often been
stated by our courts that the criteria of integration can best be assessed to a
particular situation by answering this question: "Whose business is it
anyway?" In the context of the workers in this case working under a
contract with the Appellant, one can only answer that they were working under a
contract of enterprise. The workers in this case have entered into a Consultant
Agreement with the Appellant, the terms of which are described in Exhibit A-1.
The Federal Court of Appeal in Livreur Plus Inc. v. Canada (Minister of
National Revenue – M.N.R.), [2004] F.C.A. 68, had this to say with respect
to the intention of the parties as an element to consider in the determination
of a particular type of work being performed. Mr. Justice Létourneau wrote the
following:
[TRANSLATION]
What
the parties stipulate as to the nature of their contractual relations is not
necessarily conclusive, and the Court may arrive at a different conclusion
based on the evidence before it: D&J Driveway Inc. v. The Minister of National
Revenue, 2003 FCA 453. However, if there is no unambiguous evidence to the
contrary, the Court should duly take the parties' stated intention into
account: Mayne Nickless Transport Inc. v. The Minister of National Revenue,
97-1416-UI, February 26, 1999 (T.C.C.). Essentially, the question is as to the
true nature of the relations between the parties. Thus, their sincerely
expressed intention is still an important point to consider in determining the
actual overall relationship the parties have had between themselves in a
constantly changing working world: see Wolf v. Canada, [2002] 4 F.C. 396 (F.C.A.); Attorney General of Canada v.
Les Productions Bibi et Zoé Inc., 2004 FCA 54.
[35] The Appellants have asked this Court to overturn the
decision made by the Minister in this case.
[36] In my view, the Appellants have succeeded in their
efforts to prove that the Minister's decision was ill-founded.
[37] The working conditions were examined under the
appropriate legislative provisions and applicable case law. The facts analyzed
by this Court support the view that the workers were not working under a
contract of service but as independent contractors.
[38] This Court therefore concludes that Guy Boudreau, Yvon
Charbonneau, Pierre Descent, Gilles Paquette, John Redhead, Guy Ruel, Gilbert
Touchette and Carol Vincent, were not engaged in insurable employment with the
Appellant for the period under review since they were not engaged under a
contract of service within the meaning of paragraph 5(1)(a) of the Act.
[39] This Court concludes, further, that Catherine Manconi's
employment was not excluded under section 5(2)(i) of the Act.
However, she was not engaged in insurable employment with the Appellant, for
the period under review, since she was not engaged under a contract of service
within the meaning of paragraph 5(1)(a) of the Act.
[40] Consequently, the appeals are allowed and the
Minister's decision is vacated.
Signed at Grand-Barachois, New Brunswick, this 18th day of May 2005.
"S.J. Savoie"
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