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Citation: 2004TCC81
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Date: 20040210
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Docket: 2003-1179(EI)
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BETWEEN:
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MARCEL LÉTOURNEAU,
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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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[OFFICIAL ENGLISH TRANSLATION]
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REASONS FOR JUDGMENT
François Angers J.
[1] The Appellant is appealing from a
decision made by the Minister of National Revenue (the
"Minister") on March 14, 2003, in which the employment of the
Appellant during the period beginning May 6, 2000, and ended May
5, 2001, while employed by 9080-1473 Québec Inc. (the
"Payor"), was not an insurable employment within the meaning of
the Employment Insurance Act (the "EIA"). The
Minister concluded that the Appellant's employment did not meet
the requirements of a genuine contract of service. An
employer-employee relationship did not exist between the Payor
and the Appellant.
[2] In making his decision, the
Minister relied on the following assumptions of fact, which were
admitted or denied as indicated below:
(a) the Payor was
incorporated on July 27, 1999; [Appellant has no knowledge]
(b) the Payor was
part of a group of companies controlled by
Paul-Émile Dubé; [admitted]
(c) the Appellant
was the sole shareholder of Distribution Gina
Rivière-du-Loup (1989) Inc. (hereinafter
"Distribution"); [admitted]
(d) Distribution was
a grocery wholesaler and operated a food products transportation
business; [denied]
(e) on March 28,
2000, the Payor and Distribution signed a purchase agreement
whereby Distribution sold its inventory of goods, goodwill, and
various aspects of its distribution and transportation
activities; [denied]
(f) under the
terms of this agreement, the Appellant was to contribute to the
transfer of clients and the continuation of the business'
dealings; [denied]
(g) under the terms
of this agreement, the Appellant agreed to contribute actively to
the transfer of clients and to the continuation of the business'
dealings for a six-month term, which was renewable for another
six months, and then, support the Payor in operating his
business; [denied]
(h) under the terms
of this agreement, the Appellant's involvement for the first six
months was a maximum of two and a half days per week;
[denied]
(i) under the
terms of this agreement, the Appellant's involvement for the next
six months was on an occasional basis; [denied]
(j) under the
terms of this agreement, in consideration of his services, the
Payor paid the sum of $42,000 in remuneration, payable on a
weekly basis; [denied]
(k) the sale took
place on April 30, 2000; [admitted]
(l) the Payor
did not purchase Distribution's fleet of trucks; [admitted]
(m) from May 1 to December
31, 2000, Distribution performed long-haul carriage; [denied]
(n) during the
period at issue, the Appellant worked in Distribution's office in
Rivière-du-Loup; he had refused to work in the
Payor's offices in Trois-Pistoles; [denied]
(o) the Payor did
not pay rent to Distribution for the use of the office;
[denied]
(p) the Appellant's
duties were to refer to the Payor, when the opportunity arose,
clients who came to or who called the office; [denied]
(q) during the
period at issue, the Appellant continued to work for
Distribution; [denied]
(r) the Appellant
continued to supervise Distribution's employees until December
2000; [denied]
(s) Distribution
sold its four trucks to Transport Gina Inc. on December 31, 2000;
[admitted]
(t) the
Appellant started rendering services to Transport Gina Inc. on
December 31, 2000; [denied]
(u) throughout the
period at issue, the Appellant was a consultant for Aliments
Alpha Inc., a company in which he and his son were shareholders;
[denied]
(v) the Appellant
did not work exclusively for the Payor; [denied]
(w) during the period at
issue, the Appellant performed work for the Payor, Distribution,
Transport Gina Inc., and Aliments Alpha Inc.; [denied]
(x) the Payor had no
control over the Appellant's time or schedule; [denied]
(y) the Appellant
was free to oversee Distribution's remaining activities while
performing services for the Payor; [denied]
(z) the Payor did
not provide the Appellant with any equipment; [admitted]
(aa) the Appellant incurred
telephone, travel, and office expenses; [denied]
(bb) the Appellant was acting in
accordance with a specific mandate. [denied]
[3] The Appellant is a businessperson
who, until early May 2000, was the sole shareholder of
Distribution Gina Rivière-du-Loup (1989) Inc.
("Distribution"). This company was a food products
wholesaler and provided transportation of food products.
[4] Early in 2000, the Appellant held
meetings and discussions with Félix Jean of Groupe
Paul-Émile Dubé ("Groupe Dubé").
Groupe Dubé owns five or six businesses, some of which
sell and distribute food products. Groupe Dubé was
expanding and seeking a higher volume of business. The
purpose of these meetings with the Appellant was to discuss the
potential acquisition of Distribution by Groupe Dubé.
[5] On March 12, 2000, Distribution
and Groupe Dubé signed an initial memorandum of
understanding respecting this acquisition. In this
agreement, the Appellant agreed to personally and actively
contribute to the transfer of Distribution's clients and business
to Groupe Dubé for a period of six months. Moreover,
the Appellant agreed to support Groupe Dubé, at its
request, in operating Distribution's business for an additional
six months. In consideration for these twelve months of
service, he was to be paid $42,000 during this period, on a
weekly basis. A hand-written note on the document stated
that the involvement expected of the Appellant would not be more
than two and a half days per week during the first six months,
and on an occasional basis thereafter.
[6] On March 28, 2000, Distribution
and Distributions Paul-Émile Dubé Ltée or
any other company of the Paul-Émile Dubé group
signed a purchase agreement for the purchase of inventory,
distribution, and goodwill. The established date of sale
was April 30, 2000. A service agreement between the
Appellant and the purchaser formed a part of this purchase
agreement and stipulated that the Appellant agreed to provide
services to the purchaser for a period of twelve months.
The terms are similar to the ones set out in the memorandum of
understanding.
[7] In his testimony,
Mr. Félix Jean, the purchaser's Vice-President
of Finance, confirmed the reasons for hiring the Appellant.
The Appellant was to support the sales team in order to transfer
the clients seamlessly. Given the date on which
Distribution was acquired, he wanted to ensure that the Appellant
would be available, because early in the summer, a number of
clients would be resuming their seasonal activities and Groupe
Dubé wanted to avoid losing clients. The sale took
place on April 30, 2000, yet the contract was dated May 8,
2000. This was for the purchase of assets, including goods,
goodwill, trademarks, etc., but excluding Distribution's fleet of
trucks.
[8] According to Mr. Jean, there was
never any question about the Appellant working from their
Mont-Joli premises or working on a full-time basis. He
wanted the Appellant to be near Distribution's telephone so that
clients, specifically seasonal clients, could maintain the same
routine. The purpose of this exercise had nothing to do
with the Appellant's expected performance; it was to ensure
customer support and provide some assistance. The first
six-month period was very important, whereas the last six-month
period was more or less a security measure. According to
Mr. Jean, the Appellant had no decision-making authority.
The Appellant communicated with the Director of Groupe
Dubé in Mont-Joli and the staff working in
operations. The Appellant was to provide no other service
than that which was required by the demand. The Appellant
was paid by a Groupe Dubé management company, the Payor,
9080-1473 Québec Inc.
[9] The Appellant rendered services to
the Payor from the Rivière-du-Loup offices of
Distribution. The Payor did not pay rent for the use of an
office on Distribution's premises. Mr. Jean acknowledged
that the Appellant was free to work elsewhere, as long as he
worked his two and a half days. He acknowledged that the
availability of the Appellant was more important than the result
obtained and that the Appellant's mandate was to ensure the
transition. The Payor did not have control over the
Appellant's work schedule, and the Appellant could oversee
Distribution's transport at the same time. He acknowledged
that the Appellant paid for the expenses for office and telephone
that he used at Distribution to render the services he owed the
Payor. According to him, the Appellant's wages could have
been higher at the outset and decreased at a later time, rather
than being paid out as they were. From early May to
mid-September, the Appellant devoted 60% to 70% of his time to
the Payor. His involvement decreased thereafter, then
increased again more intensively following fire damage incurred
at Groupe Dubé's warehouse in Mont-Joli.
Distribution leased its warehouse and freezing plant to Groupe
Dubé to tide them over.
[10] Beginning in mid-July, the Appellant
handled Distribution to assist a potential buyer; he handled
payroll for five employees and invoicing.
[11] The Appellant holds 20% of the capital
stock in Aliments Alpha Inc. This company prepares and
distributes pizza sauce, dough, and spice mixes. He worked
for Aliments Alpha Inc. starting in June 2002 only, and he worked
for a very short period of time.
[12] In Wiebe Door Services Ltd. v.
Minister of National Revenue, [1986] 3 F.C. 553, the
Federal Court of Appeal provided useful guidelines for making a
distinction between a contract of service and a contract for
services. In 671122 Ontario Ltd. v. Sagaz Industries
Canada Inc., [2001] 2 S.C.R. 983, the Supreme Court of
Canada endorsed these guidelines, summarizing the state of the
law as follows:
47 Although there is
no universal test to determine whether a person is an employee or
an independent contractor, I agree with MacGuigan J.A. that a
persuasive approach to the issue is that taken by Cooke J. in
Market Investigations, supra. The central question is
whether the person who has been engaged to perform the services
is performing them as a person in business on his own account. In
making this determination, the level of control the employer has
over the worker's activities will always be a factor.
However, other factors to consider include whether the worker
provides his or her own equipment, whether the worker hires his
or her own helpers, the degree of financial risk taken by the
worker, the degree of responsibility for investment and
management held by the worker, and the worker's opportunity
for profit in the performance of his or her tasks.
48 It bears repeating that the
above factors constitute a non-exhaustive list, and there is no
set formula as to their application. The relative weight of each
will depend on the particular facts and circumstances of the
case.
[13] In Gallant v. M.N.R., [1986]
F.C.J. No. 330, the Federal Court of Appeal recalls that the
indicator of a contract of service is not the control that the
employer actually exercises over his employee, but rather the
employer's power to control the way in which the employee carries
out his duties.
[14] In this case, a service agreement
negotiated within the context of the purchase of a business's
assets and goodwill exists. The Appellant's services were
retained for the purpose of ensuring the transfer of clients from
the vendor to the purchaser. According to Mr. Jean, the
Payor had very little control because the purpose had nothing to
do with the Appellant's performance, but rather, the Payor was
ensuring that the Appellant would be available to help out and
provide support to Distribution's clients during the transition
period. The Appellant was not required to provide any
service other than that required by the demand. A work
schedule was not set out, and it was not specified when the
services were to be rendered, except for the first six-month
period in which the Appellant was to work two and a half days per
week. The service agreement gave the Appellant great
flexibility. He was free to work for others, because the
Payor did not have exclusive rights to his services. The
Payor was reassured regarding the Appellant's performance by the
Payor's employees, who communicated with it. There was no
formal supervision. The Payor occupied its former offices
and was solely responsible for expenses relating to contacts and
meetings with clients. The Appellant did not receive
instructions on how to fulfil his mandate, which was to ensure a
smooth transition. There is no doubt that the Appellant
performed his work as agreed on, but the facts in this case and
the context in which the Payor set out the terms and conditions
of employment do not correspond with the supervision required by
the control criterion. Even though this work was
appropriate for the Appellant because of his specific knowledge
of his former clients, it is my opinion that Payor exercised
nearly no control.
[15] Ownership of tools is a criterion
which, in this case, does not lend itself to the conclusion that
a contract of service was created. The Appellant needed his
own office. He alone incurred the expenses relating to
maintenance, heating, and telephone service, including
long-distance calls. He was not reimbursed for
travel. Although it was preferable that he remain on-site
to ensure the smooth transition, travel expenses are a type of
expense that is usually incurred by a Payor in the case of a
contract of service.
[16] The chance of profit and risk of loss
was entirely the Appellant's. All of the expenses incurred
and the steps taken by the Appellant to ensure the smooth
transition were based on his own judgment. As mentioned
earlier, he provided his own office space and paid for telephone
and travel expenses. This criterion tends to indicate that
a contract for services existed, rather than a contract of
service.
[17] Regarding integration, the facts in
this case lead me to conclude that the Appellant's services were
not an integral part of the Payor's business. They were
only significant during the transition period, in the acquisition
of the goodwill. The Appellant worked from his former place
of business rather than on the Payor's premises. His
involvement following the fire, and the leasing of his premises
and freezing plant, were not a part of his initial contract, and
had to do more with the fact that, specifically, he leased his
buildings. Although his work was performed for the Payor,
this work was performed on an occasional basis only.
[18] Overall, these criteria do not enable
me to conclude that, in this case, a contract of service
existed. The Payor did not integrate the Appellant in his
business in the same way as he did his other employees and under
the same terms and conditions. The Appellant worked from
his own office and was not reimbursed for expenses. His
work schedule provided him with great flexibility, and he was
free to work for other employers. His performance was
assessed on the basis of his availability, rather than
results. His wages were distributed over one year, even
though the first six months demanded more of his time than the
last six months, which implies that, in this case, there was a
lump-sum payment rather than annual remuneration payable on a
weekly basis.
[19] In Laverdière v. Canada,
[1999] T.C.J. No. 124, at paragraph 45 of his reasons,
Tardif J. explains a genuine contract of service as follows:
[...] First of all, only a genuine contract of employment can
meet the requirements for being characterized as a contract of
service; a genuine contract of service must have certain
essential components, including the performance of work; that
performance must come under the authority of the person paying
the remuneration, which remuneration must be based on the
quantity and quality of the work done.
[20] In this case, the aspects to be
considered lead me to conclude that the Appellant was not in an
insurable employment, because his employment does not meet the
requirements of a genuine contract of service.
Consequently, the appeal is dismissed.
Signed at Ottawa, Canada, this 10th day of February
2004.
Angers J.
Translation certified true
on this 5th day of January 2005.
Colette Dupuis-Beaulne, Translator
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