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Citation: 2004TCC228
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Date: 20040601
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Docket: 2003-1476(EI)
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BETWEEN:
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9098‑5326 QUÉBEC 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,
and
CHRISTIAN ROY, DANIEL VACHON,
DANY LESSARD, DANY ROY,
FRÉDÉRIC ROY, GASTON ROY, JEAN‑CLAUDE PERREAULT,
YVAN GRONDIN, ÉRIC SHINK, JEAN‑NOËL LESSARD,
PAUL‑ÉMILE BISSON, DONALD CHAMPAGNE,
MAURICE CHOUINARD,
FRÉDÉRIC COUTURE, STÉPHANE DOSTIE,
GILLES FONTAINE,
Interveners.
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[OFFICIAL ENGLISH TRANSLATION]
REASONS FOR JUDGMENT
Bédard J.
[1] The
issue in this case is relatively simple. The Minister of National Revenue (the
"Minister") is of the opinion that the Workers are employees of the
Appellant whereas the Appellant asserts that they are self‑employed.
The Workers appeared as Interveners in this case.
[2] The
years at issue are 2000, 2001 and 2002. On May 22, 2002, the Minister
assessed the Appellant's employee and employer premiums for unpaid employment
insurance premiums for 42 different Workers, as well as the related
penalties and interest.
[3] Following
a request by the Appellant, the Minister modified the assessments as it appears
in his letter dated January 20, 2003. The assessments were reduced by
excluding the costs reimbursed to the 41 Workers by the Appellant, such as
meal allowances, gas expenses, lodging and other reimbursed costs; the
assessment for Robert Dubreuil for 2000 was vacated because he had not
worked for the Appellant.
[4] The
assessments were therefore reduced, for 2000, to a total of $27.61 for
two Workers; for 2001, to a total of $9,426.93 for 41 Workers; and
for 2002, to a total of $1,878.62 for ten Workers.
[5] The
facts upon which the Respondent relied in making his decision are described at
paragraph 7 of the Reply to the Notice of Appeal as follows:
[translation]
(a) The Appellant
was incorporated on December 1, 2000;
(b) The Appellant
conducted business as "T.S. Consultants";
(c) The Appellant
operated a shelf installation and assembly business for large warehouse clients
located in Quebec, Ontario and the United States;
(d) The Appellant
had a list of Workers' names and, on Sundays, the number of Workers required to
perform the week's contracts were contacted;
(e) The Workers
were hired by the Appellant as assemblers;
(f) The Workers
could refuse a contract and remain on the Appellant's call list;
(g) The clients
were the Appellant's;
(h) Workers who
accepted a contract could not have another Worker replace them. Only the
Appellant hired Workers;
(i) The Workers'
tasks involved installing and disassembling shelves (95% of the time) and
unloading trucks (5% of the time);
(j) The Workers
worked at the premises of the Appellant's clients;
(k) The Workers
worked in teams of two because the shelves are heavy;
(l) The
Appellant provided transportation to the Workers in his vehicles in order to
reach clients who were at a distance;
(m) Either a
shareholder of the Appellant or an experienced Worker gave instructions to the
Workers in order to comply with the client's plans and specifications;
(n) The Workers
followed a Monday‑to‑Friday work schedule of approximately 40 to
42 hours per week, which was set by the Appellant;
(o) The Workers
were paid between $12.50 and $14.50 per hour;
(p) Each week,
the Workers billed the Appellant according to an hourly rate for the number of
hours actually worked as well as the reimbursable costs incurred;
(q) The Workers
received their pay from the Appellant by cheque each week;
(r) The Appellant
reimbursed Workers' meal, lodging and gas expenses;
(s) The Workers
provided their own toolboxes, which included small tools, such as a small
sledgehammer, a hammer and a ratchet wrench;
(t) The
Appellant or the Appellant's clients provided the Workers with large tools;
(u) The Workers
had no risk of financial loss or gain;
(v) The Workers'
tasks were integrated into the Appellant's activities.
[6] It
should be noted that the Appellant admitted all the facts outlined in
paragraph 7 of the Reply, with the exception of those in
paragraphs (h), (n), (u) and (v).
Analysis
The law
[7] It
is appropriate to emphasize that the contractual relationship between the
Appellant and the Workers must be interpreted in a manner consistent with the
laws of the province of Quebec.
[8] In the Civil Code of Québec, different chapters deal with the
"contract of employment" (articles 2085 to 2097) and the
"contract of enterprise or for services" (articles 2098 to
2129).
[9] Article 2085 addresses the 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.
[10] Article 2098 addresses the 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.
[11] Article 2099 follows, and is written in the
following terms:
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.
[12] It can be said that
the fundamental factor that distinguishes a contract for services from an
employment contract is, in the first case, the absence of a relationship of
subordination between the individual providing the services and the client, and
the presence, in the second case, of the employer's right to direct and control
the employee. Justice Pratte
of the Federal Court of Appeal made the following decision in Gallant v.
M.N.R.:
. . . The distinguishing
feature of a contract of service is not the control actually exercised by
the employer over his employee but the power the employer has to
control the way the employee performs his duties. [My emphasis.]
It must therefore first be determined whether there is
or is not a relationship of subordination between the Appellant and the
Workers.
[13] In Wiebe Door Services Ltd. v. M.N.R., [1986] 3 F.C. 553,
Justice MacGuigan of the Federal Court of Appeal made a statement on the
control test and recognized that the right to give orders and instructions to
the employee regarding the manner in which to carry out the work is an
essential criterion for the exercise of control over an employee's work. In Vulcain Alarme Inc.
v. Canada (Minister of National Revenue - M.N.R.),
[1999] F.C.J. No. 749, Justice Létourneau of the Federal
Court of Appeal also stated that the basis of control is the giving of orders
and instructions with respect to the way the employee's work is to be done. In
this case, it must therefore be determined, in light of the evidence, whether
the Appellant gave or could give Workers instructions with respect to the
manner in which their work should be accomplished. That being said, control of
the results or the quality of the work must not be confused with control over
the manner in which the Worker performs the work for which he is responsible.
In fact, it is the rare company that contracts out work without ensuring that
it is performed in compliance with its requirements.
[14] However, when the
evidence does not allow a clear determination as to the existence of a
relationship of subordination, I am of the opinion that the contractual
relationship must therefore be examined in light of other factors outlined by
the Federal Court of Appeal in Wiebe Door, supra,
and revisited by the Supreme Court in 671122 Ontario Ltd. v. Sagaz
Industries Canada Inc., [2001] 2 S.C.R. 983: integration,
ownership of the tools required to carry out the work, chances of profit and
risk of loss. These factors can indicate the existence of a contract of
service.
[15] A review of the
facts in light of these tests will usually confirm the existence or lack of a
relationship of subordination; in other words, when there is doubt, a more
holistic approach must be used.
[16] Finally, I should
add that when the issue is unclear, in other words, when the relevant factors indicate both conclusions are
possible,
it may be helpful to find out the parties' intentions when the contract was
drawn up. I believe that the
way the parties viewed their agreement must prevail, except if they are
mistaken with respect to the real nature of their relationship. Certainly, the
Court will not consider the parties' provisions with respect to the nature of
their contractual relationship if it must find to the contrary based on the
evidence submitted to it. Nonetheless, in the absence of unequivocal evidence
or evidence to the contrary, the Court must certainly take the stated
intentions of the parties into account.
Relationship of subordination
[17] Are the Workers carrying out their work under the Appellant's
direction or control? Did or could the Appellant give orders to the Workers?
[18] It is once again
appropriate to recall that the contractual relationship between the Appellant
and the Workers must be interpreted in a manner consistent with the laws of the
province of Quebec. From articles 2085, 2098 and 2099 of the Civil Code of Québec,
it is clear that the fundamental distinction between a contract for services and
a contract of employment is, in the first case, the lack of a relationship of
subordination between the individual providing the services and the client, and
the presence, in the second case, of the employer's right to direct and control
the employee. In other words, did or could the Appellant give instructions to
the Workers with respect to the manner in which they should carry out their
work? That being said, control
of the results or the quality of the work must not be confused with control
over the manner in which the Worker performs the work for which he or she is
responsible.
[19] In this case, the
Appellant admitted during the hearing that the Minister's statement was correct
at paragraph 7 of the Reply to the Notice of Appeal that a shareholder of
the Appellant or an experienced Worker gave instructions to the Workers to
ensure compliance with the client's plans and specifications.
[20] Mélanie Shink,
Agent for the Appellant, and the Interveners who testified, with the exception
of Mr. Bisson, gave similar testimony. The testimony of Mr. Croteau,
who worked at the Appeals Division of the Canada Customs and Revenue Agency,
and who conducted the investigation in this case, and the report he submitted
as Exhibit I‑2, reveal that Alain Tardif, a substantial
shareholder of the Appellant, or Yvan Grondin, an experienced Worker,
directed the work teams. The Appellant's client submitted the plans and
specifications to the two individuals, who gave instructions to these Workers
so that these plans and specifications were respected and their requirements
were met.
[21] The evidence
therefore demonstrated clearly that there was a relationship of subordination
between the Workers and the Appellant, which is the very essence of a contract
of employment. The fact that the evidence also revealed that a Worker was not
permitted to have another Worker replace him only confirms, in my opinion, that
the Workers were employees of the Appellant.
Ownership of tools, chances of
profit and risk of loss
[22] We will now examine
the contractual relationships between the parties in light of the tests
outlined in Wiebe Door, supra, such as ownership of tools,
chances of profit and risk of loss. As previously mentioned, these tests can
indicate the existence of a contract for services.
(i) The Workers provided their
own toolbox, which included small tools such as a small sledgehammer, a hammer
and a ratchet wrench, worth less than $100. The Appellant's clients provided
the large tools, such as a lift truck. The Appellant transported the Workers in
his vehicles when the clients were at a distance.
(ii) The Workers' pay varied
between $12.50 and $14.50 per hour. Each week the Workers billed the
Appellant according to the agreed hourly rate for the number of hours they had
actually worked, in addition to the reimbursable expenses they had incurred.
The Appellant paid the Workers by cheque each week and he reimbursed their
meal, lodging and gas expenses. The evidence revealed very clearly that the
Workers did not have any risk of loss or chances of profit.
[23] Although a great deal of weight may not be given to these two factors,
given the nature of the services rendered, the needs which had to be met and
the few work tools used, on the other hand, I cannot help but conclude that
they do not indicate the existence of a contract for services.
Intention of the parties
[24] As I mentioned previously, the manner in which the parties may have
viewed their agreement must prevail, unless they were mistaken as to the true
nature of their agreement. Certainly, the Appellant and the Interveners who
testified emphasized that their contractual relationships were in the nature of
a contract for services. However, the evidence submitted in this case leads me
to conclude that the parties were mistaken with respect to the true nature of
their relationships.
[25] For these reasons, I
find that the employment was insurable for the years at issue. However, since
the Minister has admitted he erred in his interpretation of the Act and
its Regulations, that the taxes collected (GST and QST) by certain
Workers must be included in their insurable employment for the purposes of
calculating the employer's assessment, I therefore conclude that the said
amounts are excluded from their insurable earnings.
Signed at Montréal, Quebec, this 1st day of
June 2004.
Bédard J.
Translation certified true
on this 27th day
of September 2004.
Shulamit Day, Translator
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