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Citation: 2004TCC231
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Date: 20040415
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Dockets: 2003-2088(EI)
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BETWEEN:
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CHAUFFEUR PLUS INC.,
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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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REASONS FOR JUDGMENT
Tardif, J.
[1] This is an appeal of a decision dated March 24, 2003, that the Appellant's employment for the years 2001 and 2002 of drivers who carried out work for it was under a contract of service.
[2] The Respondent justified his decision in relying on the following assumptions of fact:
[TRANSLATION]
(a) The Appellant, established as a corporation on March 31, 1994, operates a business providing driving services to various businesses.
(b) During the years at issue, equal shareholders of the Appellant were Lionel Fréchette and Marcel Filion.
(c) For a lump sum, the Appellant provides truck-driving services to its clients.
(d) The Appellant does not own any cars or trucks.
(e) The Appellant has a list of workers with driver's licences; it contacts drivers when one of its clients needs a truck driver.
(f) The Appellant initially contacts one of the workers to propose a delivery that the worker is free to accept or refuse.
(g) If the worker accepts, the Appellant informs him of the time of departure and where he should go.
(h) The worker does not own any trucks. He only has a permit to drive them and uses the truck or vehicle belonging to the Payor's client.
(i) The Appellant has no written contract with its clients or its workers.
(j) The Payor's clients confirmed the following:
- They use the Payor's vehicle driver services.
- They give their directions to the Payor, who is responsible for carrying them out.
- They do not pay the drivers. They pay the Payor.
(k) The Appellant gives instructions to the workers with respect to the location, time and vehicle, as well as the travel to be done.
(l) The workers do not provide any work materials and incur no expenses when carrying out their work for the Appellant.
(m) The Appellant gave the workers a sheet on which the departure and arrival times were written, and the workers submitted it to the Appellant in order to be paid.
(n) The workers were paid in accordance with the hours actually worked, according to an hourly rate set by the Appellant.
(o) The Appellant paid the workers on a monthly basis.
(p) The Appellant reimbursed meal costs incurred when the workers worked more than five hours or when they travelled long distances.
(q) The Appellant had an insurance policy covering public liability and property damage, collision or upset, and accidents without collision or upset for all the vehicles driven by his workers.
(r) The amounts included in the notice of assessments included only salary payments on which the employment insurance premiums were payable (and not the reimbursement of expenses).
[3] The Appellant admitted as true paragraphs (a), (b), (d), (e), (f), (i), (j) and (r).
[4] It denied the other paragraphs as written.
[5] To satisfy its burden of proof, the Appellant had Yvan Gagnon and André Laroche testify, as well as one of its two shareholders, Lionel Fréchette.
[6] The Appellant had established a business for the sole purpose of providing the services of qualified and competent drivers to drive all types of vehicles, from ordinary cars to enormous semi-trailer trucks with or without loads for short or long hauls, for both one-way or return trips.
[7] The drivers held various types of driver's licences, from Class I to Class V. Some licences had certain requirements of the drivers, such as passing medical examinations.
[8] The Appellant had two types of clients with whom it did not have any written contract. The first type included clients who required a pre-determined price, a type of lump sum, a "turnkey" contract. The other type included clients who retained the services of one or several drivers through the Appellant, without prior agreement with respect to the total cost of services; the Appellant provided detailed billing after the required work was carried out, including all disbursements on the invoice.
[9] Essentially, the Appellant claimed that the drivers were paid a rate or amount that was determined and agreed to before the work began. The two drivers who testified affirmed that they were totally free to accept or refuse the work offered. They both indicated that, if they did not like the amount offered, they could negotiate or simply refuse the offer made by the Appellant.
[10] Among the elements about which there is no question, I have noted the following:
· The drivers had no risk of loss.
· Their remuneration directly and explicitly depended on the time required to perform the work, the parameters of which were known when the offer was accepted.
· All the expenses and disbursements made by the drivers were reimbursed.
· In the event of any unforeseen circumstances, such as mechanical breakdown, abnormal traffic congestion, etc., the drivers were compensated to cover the time lost.
· The drivers had no relationship with the owner of the vehicle they drove, regardless of what happened.
· There was no commitment of exclusivity on the part of the drivers. They could accept or refuse the work without restriction.
· When unforeseen circumstances, problems or complications arose, the drivers had to contact the Appellant. They never communicated with the owner of the vehicle they were driving.
· An insurance policy had been underwritten to cover all workers.
· Periodic checks with the authorities, such as Sûreté du Québec, demonstrated that there was ongoing concern that the drivers were and remained qualified and competent.
· The drivers were required to submit a detailed report prior to being paid.
· The Appellant kept a driver log; the details varied.
· The drivers could not arrange a replacement of their choice to carry out the work they had agreed to carry out.
[11] The Respondent gave a great deal of significance to the fact that the Appellant had underwritten an insurance policy to cover goods and individuals, specifically the drivers.
[12] The Appellant acted as a broker or intermediary between the businesses that had various occasional needs for drivers and individuals who had the necessary qualifications and who found the offers submitted to them attractive with respect to the price, the time the work was to be conducted and the type of trip to be made.
[13] The evidence showed that, most of the time, this income was additional or supplementary income for the drivers. The majority of the drivers seemed to have other activities from which they earned their living. This observation arises clearly from the amounts paid to various drivers for the years at issue. In the vast majority of cases, these were insignificant amounts. To substantiate this assertion, I reproduce, in part, the tables in Exhibit I-4, page 14.
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NAME
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INSURABLE PAY 2001
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BÉLIVEAU É
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$443.00
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BÉLIVEAU R
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$115.00
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BOILARD L
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$2,173.00
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BOULANGER G
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$25,002.00
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CAMIRÉ J
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$38.00
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COMEAU D
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$61.00
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CÔTÉ G
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$7,703.00
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FILION J. P.
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$10,561.00
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FOURNIER Y.
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$228.00
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GAGNON Y
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$315.00
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GARDNER C.
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$3,261.00
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GARDNER G.
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$831.00
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GAUTHIER Y.
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$7,635.00
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GODBOUT R.
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$33.00
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LEBLANC G.
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$270.00
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LÉGARÉ C.
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$95.00
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MARTEL C.
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$47.00
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MASSÉ Y.
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$151.00
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NOLIN M.
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$960.00
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PLANTE D.
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$3,370.00
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ROUX R
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$44.00
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TREMBLAY M.
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$522.00
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VALLÉE P.
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$405.00
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VERVILLE R.
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$3,837.00
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NAME
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INSURABLE PAY 2002
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BOILARD L
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$542.18
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BOULANGER G
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$5,103.24
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CÔTÉ G
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$333.00
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FILION J. P.
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$1,603.00
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FRÉCHETTE C
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$169.00
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GARDNER C.
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$887.50
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GARDNER G.
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$454.50
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GARDNER J. M.
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$189.00
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GAUTHIER Y.
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$843.00
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LAROCHE A.
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$772.86
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LEMIRE R.
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$187.00
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PLANTE D.
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$524.25
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TREMBLAY M.
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$356.00
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VERVILLE R.
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$739.00
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[14] The process by which the Respondent concluded that the drivers had worked under an actual contract of service was summarized on pages 10 and 11 of form CPT110 (Exhibit I-4). I consider it useful to reproduce the entire text:
[TRANSLATION]
Control
During the period at issue, did the Payor exercise control over the drivers' activities?
When the Payor receives requests for services from his clients, he contacts the drivers to offer them work. The drivers have the choice of accepting or refusing it. Thus the initial agreement between the parties is that the workers are on call. If he accepts, the worker submits to the Payor's demands. If he refuses, the Payor contacts another worker to offer him the work. The Payor's shareholders, Lionel Fréchette and Marcel Fillion, stated that they gave instructions to the drivers with respect to the location, time, vehicle and travel. The drivers contacted corroborated the shareholders' version of operations.
These elements are supported by letters from clients, at Tabs M-1 to M-5, which indicate that the requests for services are given to Chauffeur Plus Inc. and that clients give no instructions to the drivers.
Chauffeur Plus Inc. sets the itineraries, driver work schedules and the number of drivers, in accordance with the services requested by its clients,. These requirements demonstrate that the drivers must work at a specific time, which represents another indication that they were directed and controlled by the Payor.
Tab M, the invoices prepared by the Payor, demonstrates that Chauffeur Plus Inc. counted the hours worked by its drivers. This fact shows that the Payor exercises control over the hours worked and is able to justify to its clients the hours billed and worked by its drivers.
Based on these elements, we consider that the degree of control exercised by Chauffeur Plus Inc. over the drivers is in keeping with the test for a contract of service.
Provision of equipment and tools
The parties confirmed that the work tools were provided by the Payor's clients. The workers provided nothing with respect to the execution of their duties.
Generally, independent workers own their work tools, whereas a salaried worker does not. Working with tools provided by the Payor or his clients indicates to us that the work was carried out by an employee under a contract of service.
Chance of profit or risk of loss
In this docket, the truckers were remunerated in accordance with the hours worked and an hourly rate established by the Payor. Chauffeur Plus Inc. also provided allowances for meals and other expenses assumed by the truckers when they worked in distant regions.
At Tab K, the vehicle insurance for public liability and property damage held by the Payor demonstrates that financial risk to the drivers was non-existent.
The drivers did not incur any risk of loss or chance of profit since they had nothing to provide, they were paid by the hour, their meal and lodging expenses were covered by the Payor, clients were clients of the Payor and accident insurance was the responsibility of Chauffeur Plus Inc.
The employees assumed no financial risk. As a result, the absence of any financial risk to the worker indicates work conducted by an employee under a contract of service.
Integration
The degree of integration must be examined from the worker's point of view. On this criterion, the drivers integrated their services into the business activities of Chauffeur Plus Inc. Thus, they conducted their work for clients of the Payor as the Payor requested.
We conclude that the drivers were integrated into the Payor's business activities, since they carried out the work according to the needs of the Payor's clients and not for their clients.
Conclusion with respect to drivers according to paragraph 5(1)(a) of the EIA
After analysing the facts, the drivers' employment with Chauffeur Plus Inc., during the periods at issue, meets the requirements of a contract of service within the meaning of paragraph 5(1)(a) of the EIA.
[15] The fact that the Appellant underwrote a liability insurance policy is not determinative since an informed and cautious individual knows that you must protect yourself against unforeseen circumstances leading to claims that may cause financial ruin.
[16] Furthermore, the only reason for insurance, and this is a largely justified measure, is for protection against potential lawsuits requiring colossal disbursements, specifically for lawyers' fees, that must be paid even if the suit is unfounded or even frivolous.
[17] Any good family man who decides to build a home using the services of a number of contractors, particularly plumbers, electricians, plasterers, cabinet makers, masons, etc., will take out an insurance policy for protection against all the hazards of a work site even though there is no dispute as to the contractual status of the various workers on the site.
[18] With respect to reimbursement of expenses, even the fact that expenses such as meals, telephone and hotel costs are reimbursed is not determinative. In fact, there are more and more situations in which contractors want to reduce their risks by anticipating that all disbursements to be reimbursed should be backed by supporting documentation.
[19] With respect to ownership of tools, the employer who paid the agreed amount for the work conducted did not provide any work tools to the driver since it did not own the motor vehicles. They were the property of the companies to which the services were rendered.
[20] Finally, with respect to the tests supporting the argument for a contract of service (the power of control, a relationship of subordination) the Appellant supported his claims by referring to the decision in Vulcain Alarme Inc. v. Canada (Minister of National Revenue - M.N.R.) [1999] F.C.J. No. 749. In this case, Létourneau, J.A., of the Federal Court of Appeal dealt at length with the concept of control. He put a great deal of emphasis on what control was not, and was not explicit with respect to the facts and actions that identify a concrete demonstration of the concept of control.
[21] Thus, we read in that case:
· That setting remuneration is not control of work;
· That defining the purpose of the exercise alone is not control;
· That reimbursement of expenses cannot serve as a basis for a relationship of subordination;
· That giving orders and instructions in the way the work is to be done does not necessarily constitute evidence of control;
· That control does not reside in the act of payment;
· That control of the results of the work must not be confused with control of the worker; and
· Controlling the quality of the work is not the same thing as controlling its performance by the worker hired to do it.
[22] In this case, the purpose of the business was to provide drivers for all types of motor vehicles, from ordinary cars to the most sophisticated trucks. The Appellant did not own any vehicles, and the drivers drove vehicles that were the property or responsibility of the individuals from whom contracts were obtained.
[23] There were two types of contracts obtained that could be entered into. Some involved the provision of work by a driver for a specific period in exchange for a lump sum, a type of all-inclusive or turnkey contract for a pre-determined price. The other form could be called an open contract; in other words, the work was carried out according to the instructions provided.
[24] Once the work was completed, a report was submitted by the driver to the Appellant. Billing was based on this report.
[25] The existence of a power of control is doubtless the most fundamental element in determining whether there is a contract of service or a contract for services.
[26] It is often extremely difficult to identify the specific concrete manifestations of the exercise of control.
[27] The Federal Court of Appeal clearly and expressly affirmed that it was sufficient to note the existence of the Payor's power of control and the absence of facts that would demonstrate that the Payor had renounced it, to conclude that there is a contract of service.
[28] Very frequently, elements are noted which, at first glance, substantiate a relationship of subordination or the existence of some kind of power of control and yet which are also compatible with a contract for services.
[29] During a decision recently rendered by the Federal Court of Appeal on February 13, 2004, Le Livreur Plus Inc. v. M.N.R., [2004] F.C.J. No. 267, (QL) Létourneau, J.A., stated various aspects of the issue. He said the following:
[17] 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.
[18] In these circumstances, the tests mentioned in Wiebe Door Services Ltd. v. M.N.R., 87 D.T.C. 5025, namely the degree of control, ownership of the work tools, the chance of profit and risk of loss, and finally integration, are only points of reference: Charbonneau v. Canada (Minister of National Revenue - M.N.R.) (1996), 207 N.R. 299, paragraph 3. Where a real contract exists, the Court must determine whether there is between the parties a relationship of subordination which is characteristic of a contract of employment, or whether there is instead a degree of independence which indicates a contract of enterprise: ibid.
[19] Having said that, in terms of control the Court should not confuse control over the result or quality of the work with control over its performance by the worker responsible for doing it: Vulcain Alarme Inc. v. The Minister of National Revenue, A-376-98, May 11, 1999, paragraph 10, (F.C.A.); D & J Driveway Inc. v. The Minister of National Revenue, supra, at paragraph 9. As our colleague Décary J.A. said in Charbonneau v. Canada (Minister of National Revenue - M.N.R.), supra, followed in Jaillet v. Canada (Minister of National Revenue - M.N.R.), 2002 FCA 394, "It is indeed rare for a person to give out work and not to ensure that the work is performed in accordance with his or her requirements and at the locations agreed upon. Monitoring the result must not be confused with controlling the worker".
[20] I agree with the applicant's arguments. A subcontractor is not a person who is free from all restraint, working as he likes, doing as he pleases, without the slightest concern for his fellow contractors and third parties. He is not a dilettante with a cavalier, or even disrespectful, whimsical or irresponsible, attitude. He works within a defined framework but does so independently and outside of the business of the general contractor. The subcontract often assumes a rigid stance dictated by the general contractor's obligations: a person has to take it or leave it. However, its nature is not thereby altered, and the general contractor does not lose his right of monitoring the results and the quality of the work, since he is wholly and solely responsible to his customers.
[21] Finally, determining the value of the remuneration, defining the purpose sought or making payment for work by cheque or otherwise does not amount to controlling work, since these features exist both in a contract of enterprise and in a contract of employment: Canada (Attorney General) v. Rousselle et al. (1990), 124 N.R. 339 (F.C.A.).
[30] The expressions "power of control and relationship of subordination" imply that the Payor has the right and authority to intervene to regulate the work being performed. He can require certain directions. He can supervise the environment, the cleanliness, etc. He may make the performance of the work subject to compliance with safety standards, such as wearing special clothing, safety glasses, hardhats, earplugs, etc. He may have all kinds of requirements with respect to the work schedule, the rate of production, and control of quality and quantity. The Payor may require compliance with a code of ethics with respect to language, behaviour etc.
[31] On the other hand, when such powers do not exist, and the Payor must agree that the work be performed without a right to oversee it, even if only with respect to the results, when the person who performed the work cannot rely on the fact that there will be a follow-up and must live with the possibility that the legal relationship may end at the end of the work in progress, it is therefore likely that the contract binding the parties is not a contract of service but a contract for services.
[32] In order for there to be a relationship of subordination, this implies that there is some stability, regularity and continuity to the legal relationship between the person who assigns the work and the one who performs it.
[33] Another significant characteristic is the degree of autonomy of the parties to the agreement. Thus, when the legal relationship or the contract takes effect and shape based on a discussion between equals in which each of the parties may put forth his conditions to the point of imperilling the creation of the desired contract if the requirements are not accepted, it is difficult to imagine in such a case that there is a relationship of subordination.
[34] When the parties are both interested in being totally and entirely satisfied with their respective behaviour in order for the work to be prolonged or renewed, there is the likelihood that there are two entrepreneurs, each subordinate to the other.
[35] When there is an actual contract of service, it may be very difficult to identify the relationship of subordination, especially if the employer practices the new management philosophy in which workers are human beings, not unthinking robots. On the other hand, in all cases, when he wants to end a contract, he must comply with very specific terms and conditions, such as notice, reasons, etc.
[36] In this case, the drivers were totally autonomous and independent. They had all the qualifications and skills required to perform the work. They had to comply with certain requirements, specifically those prescribed by laws and regulations. They had to be on time and comply with the instructions given by the Appellant in its function as an intermediary, in exchange for a pre-determined amount.
[37] The Appellant had nothing to do with the content of the work and the drivers' manner of working. It only communicated the parameters of the contract that had already been obtained from the truck owner or owners. The drivers had the right to agree or refuse to perform the suggested work. They were totally autonomous in that they could perform any kind of work for someone else. In addition, some of them had their own activities and occasionally accepted the driving work, doubtless in order to make ends meet.
[38] In light of all the evidence, based on the prevailing conditions, both with respect to the agreements with the drivers and with respect to the performance of the work and the purpose of the exercise, it appears that the drivers acted essentially as sub-contractors. The drivers' work performed for the Appellant was not carried out under a contract of service but rather under a contract for services.
[39] Consequently, the Appeal is allowed in that the drivers, whose services were retained by the Appellant, performed their work for the two years at issue not under a contract of services but rather under a contract for services.
Signed at Ottawa, Canada, this 15th day of April 2004.
Justice Tardif
Translation certified true
on this 18th day of August 2004.
Shulamit Day, Translator
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