Centre Du Clavier Allard Inc. v. M.N.R., docket 1999-3865-EI

Date: 20010313

Docket: 1999-3865-EI

BETWEEN:

CENTRE DU CLAVIER ALLARD INC.,

Appellant,

and

THE MINISTER OF NATIONAL REVENUE,

Respondent.

Reasons for Judgment

Somers, D.J.T.C.C.

[1]      This appeal was heard at Montréal, Quebec, on January 30, 2001.

[2]      In a letter dated June 22, 1999, the Minister of National Revenue (the "Minister") informed the appellant of his decision upholding the assessment of November 5, 1998, in the amount of $8,891.81 with respect to employment insurance premiums on the grounds that the employment held by the workers met the requirements of a contract of service and, therefore, there was an employer-employee relationship between the appellant and the workers during the period at issue.

[3]      Subsection 5(1) of the Employment Insurance Act reads in part 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;

. . .

[4]      The burden of proof is on the appellant. It must show on a balance of probabilities that the Minister's decision is wrong in fact and in law. Each case falls to be decided on its own facts.

[5]      In making his decision, the Minister relied on the following facts, which were either admitted or denied:

          [TRANSLATION]

(a)         The appellant operated a business selling and repairing various musical instruments. (admitted)

(b)         The appellant also offered music lessons to its customers. (denied)

(c)         The appellant operated two stores, one in Joliette and one in Repentigny. (admitted)

(d)         The appellant advertised that it sold and repaired musical instruments and offered music lessons. (admitted)

(e)         The appellant employed two groups of workers: sales clerks, who worked on the appellant's premises according to the schedule set by the appellant, and dance, music and voice teachers. (denied)

(f)          Cynthia Allard was a sales clerk in the appellant's dance apparel boutique. She was paid $8.00 an hour. (denied)

(g)         Robert Corbeil was a sales clerk, instrument repairman and occasional deliveryman. He worked on an as-called basis at the Galeries Joliette. (denied)

(h)         Line Côté was a sales clerk and taught piano, keyboard and organ at the Repentigny branch. In addition, she handled purchasing and calculated the teachers' class time. (denied)

(i)          Johanne Gauthier was a sales clerk and handled the clerical work at Repentigny. She was paid $8.00 an hour by the appellant. (denied)

(j)          Michel Ménard was a sales clerk, made deliveries and also renovated the appellant's premises when necessary. He was paid $450.00 a week by the appellant regardless of the number of hours he worked. (denied)

(k)         Jean-François Beauséjour taught trumpet. He was paid $10.00 an hour by the appellant. (denied)

(l)          Martin Bélisle taught guitar. He was paid $12.00 an hour by the appellant. (denied)

(m)        Louise Desroches taught piano. She claimed that she was paid directly by the students. (denied)

(n)         Annie Desrosiers taught violin. She was paid $12.00 an hour by the appellant. (denied)

(o)         Sophie Desrosiers taught keyboard, organ and piano. She was paid $12.00 an hour by the appellant. (denied)

(p)         Sébastien Dufour taught guitar. He was paid $14.00 an hour by the appellant. (denied)

(q)         Martin Gingras taught guitar. He was paid between $10.00 and $12.00 an hour by the appellant. (denied)

(r)         Magalie Giroux taught voice. (denied)

(s)         Jean-Marc Juneau taught guitar. He was paid $16.50 an hour by the appellant. (denied)

(t)          François Leblanc taught the piano accordion. He was paid $6.00 a half-hour by the appellant. (denied)

(u)         Louise Lebrun taught voice. She was paid $21.50 an hour by the appellant. (denied)

(v)         Isabelle Massicotte was a music teacher. (denied)

(w)        Josée Massicotte taught classical piano. (denied)

(x)         Jean-François Rondeau taught percussion. He was paid $11.00 an hour by the appellant. (denied)

(y)         All 25 workers provided services to the payer under a contract of service. (denied)

(z)         The students were the appellant's, and the appellant determined class schedules. (denied)

(aa)       The fees for the lessons were determined by the appellant, and only the appellant could give a discount on the fees (discount for months paid in advance). (denied)

(bb)       The students paid the appellant for the lessons. (denied)

(cc)       Only students who had paid for their lessons could attend the classes. (denied)

(dd)       The number of students assigned to each teacher was determined by the appellant on the basis of student registration and each teacher's availability. (denied)

(ee)       When the teachers gave lessons, they themselves determined their work techniques and what method they would follow, depending on the students' needs and their level. (denied)

(ff)         Some teachers had signed agreements with the appellant. (denied)

(gg)       According to the agreement, the appellant undertook

-           to provide a room equipped with the instruments required for the type of instruction involved,

-          to provide a dance studio equipped with a sound system and barres for practice,

-          to provide all of the teacher's students,

-          to provide the advertising required to attract new student registrations,

-      to provide administrative services, including scheduling lessons, organizing groups, and looking after the telephone and registrations. (denied)

(hh)       According to the agreement, the teacher undertook

-          to indicate at the beginning of the session the times that he or she would be available and to abide by those times,

-          to provide professional instruction (learning content) in accordance with the appellant's criteria,

-          to adhere to the teaching schedules and to make no changes without prior authorization,

-      to notify management of any problems with students           or parents, in accordance with the rules of the school,

-          to collect the money for his or her classes and complete the attendance sheets,

-          to complete a progress report for each student in accordance with the school's teaching criteria,

-          to participate in the school's various activities, such as the end-of-year recital, the festival and exhibitions. (denied)

(ii)         In 1997, the appellant made no employment insurance premium source deductions for the people on the list appended to this Reply as an integral part thereof. (denied)

(jj)         During the year at issue, there was a contract of service between the appellant and the workers. (denied)

[6]      The appellant operated a business selling and repairing various musical instruments and also offered music lessons to its customers on its premises in Joliette and Repentigny, Quebec.

[7]      The appellant advertised in the telephone directory as follows: [TRANSLATION] "Sale and rental of new and used musical instruments, Music School, Dance School, Music Awareness 3 years and over, Sheet Music" (Exhibit I-1).

[8]      To accommodate its customers, the appellant offered the opportunity to take music lessons with a teacher. The appellant had a list showing the teachers who were available to teach music and indicating as well their specialties. Following discussion with the customer, the appellant would find a teacher to give music lessons. It was the teacher who determined the level of instruction to give the customer after assessing his or her musical knowledge. Each teacher, according to his or her testimony, determined the teaching method jointly with the customer.

[9]      There was a written or oral agreement with each teacher, and each was paid a different hourly rate.

[10]     The appellant collected the money from the customers every two weeks, and paid the teachers according to the number of hours they had taught. The teacher undertook to ensure the customers' regular attendance at the music classes. Each teacher gave the appellant a statement of the hours he or she had worked; if the customer did not pay, the teacher was not paid by appellant.

[11]     Daniel Allard, the owner of the appellant, acknowledged that a written contract had been signed with Sébastien Dufour, a teacher (Exhibit I-2).

[12]     That contract provides the following particulars:

[TRANSLATION]

Centre du Clavier Allard undertakes

-            to provide a music room equipped with the instruments required-piano, organ or guitar and music stands-for the type of instruction involved,

-                      to provide a dance studio equipped with a sound system and barres for practice,

-                      to provide all of the teacher's students,

-                      to provide the advertising required to attract new student registrations,

-                      to provide administrative services, including scheduling lessons, organizing groups, and looking after the telephone and registrations,

-                      to pay Sébastien Dufour at the rate of $12.00/hour for teaching and $12.00/hour for general work, or in accordance with the special conditions set out hereinafter.

The employer or teacher Sébastien Dufour undertakes

-                      to indicate at the beginning of the session the times that he will available and to abide by those times: Thursday, Friday, Saturday,

-                      to provide professional instruction (learning content) in accordance with the criteria of Centre du Clavier Allard,

-                      to adhere to the teaching schedules and to make no changes without prior authorization,

-                      to notify management of any problems with students or parents, in accordance with the rules of the school,

-                      to collect the money for his classes, complete the attendance sheets and deposit forms, and advise management if there are any collection problems,

-                      to complete a progress report for each student in accordance with the school's teaching criteria,

-                      to participate in the school's various activities, such as the end-of-year recital, the festival and exhibitions. . . .

[13]     The terms and conditions set out in this contract are substantially the same as those described by the teachers who testified at the hearing of this case. The teachers taught a few hours a week in accordance with the agreement with the appellant's customers.

[14]     The teachers gave the lessons in the space provided by the appellant. Musical instruments were also provided by the appellant. Teachers would occasionally bring their own instruments, such as a violin, to the appellant's premises. The teacher could, jointly with the customer, change the number of hours of instruction required by that customer.

[15]     Admittedly, the teachers provided their services for only a few hours a week. They could do other things elsewhere, either involving themselves in activities at home or continuing their education. At the hearing of this case, a number of teachers described substantially the same working conditions.

[16]     There were 25 workers, most of whom were teachers providing their services on the appellant's premises. Daniel Allard, the owner of the appellant, admitted that the other teachers, who did not testify, were employed under the same working conditions as those who did testify.

[17]     A contract of service is a contract under which one party, the servant or employee, agrees, for either a period of time or indefinitely, and either full time or part time, to work for the other party, the master or the employer; it does not normally envisage the accomplishment of a specified amount of work but does normally contemplate the servant putting his personal services at the disposal of the master during some period of time.

[18]     A contract for services is a contract under which the one party agrees that certain specified work will be done for the other; it does normally envisage the accomplishment of a specified job or task and normally does not require that the contractor do anything personally.

[19]     In Wiebe Door Services Ltd. v M.N.R., 87 DTC 5025, the Federal Court of Appeal properly distinguished a contract of service from a contract for services by examining the whole of the various elements which constitute the relationship between the parties and recognized the following four basic criteria for distinguishing a contract of service from a contract for services:

(a)       the degree of control exercised by the employer;

(b)      ownership of the tools;

(c)      chance of profit and risk of loss;

(d)      the degree of integration.

(a)       The degree of control

[20]     The appellant hired the teachers subject to certain constraints: they had to give the lessons on the appellant's premises and indicate the times they were available and abide by those times. However, there was some flexibility, allowing teachers to alter the schedule on occasion, but any changes had to be made with the consent of the customer and the appellant. It was the appellant who ultimately determined the class schedule. The fact that the teachers had some discretion over the method they would use had no effect on the appellant's control over the teachers. It is the right to exercise control and not the actual exercise of control that is relevant. Based on the evidence as a whole, there was a contract of service according to this criterion.

(b)      Ownership of tools

[21]     The appellant provided the premises for giving the music lessons. Seven or eight rooms were available for the teachers and customers. Some instruments were furnished by the appellant to facilitate the instruction. The customers were the appellant's, not the teachers'. Advertising was provided and paid for by the appellant. Although some of the teachers provided musical instruments, this fact is not decisive because the appellant also provided some instruments in addition to the premises where the lessons were given. On the basis of this criterion, it is reasonable to conclude that the contract was a contract of service.

(c)      Chance of profit and risk of loss

[22]     The teachers were paid at an hourly rate according to their level of excellence and they incurred no expenses other than for transportation to the appellant's premises. The teachers were not paid if the customers did not pay the appellant; however, the evidence did not disclose that this situation had actually occurred. The appellant handled the collection of the money from the customers and paid the teachers every two weeks according to a fixed hourly rate. It is true that, if the teachers taught fewer hours, their pay was less, but the whole of the profits or losses from the business were the appellant's. Daniel Allard testified that he had an annual turnover of $500,000 and that 15% of those revenues came from the lessons given by the teachers. The evidence showed that the teachers had no chance of profit or risk of loss. According to this criterion, there was a contract of service.

(d)      Integration

[23]     The teachers were hired by the appellant to give music lessons on its premises. The appellant offered those services to its customers. The lessons were offered under the establishment's name. This part of the business's commercial activities could not exist without the teachers' contribution. Accordingly, the Court is able to conclude that the teachers formed, on a part-time basis, an integral part of the business.

[24]     The agreement between the parties does not necessarily determine the nature of the workers' employment. The fact that source deductions were not made or that paid vacations were not given does not necessarily mean that a contract for services is involved.

[25]     There were 25 workers who provided services to the appellant, most of them being music teachers. Counsel for the appellant admitted to the Court that the worker Cynthia Allard was on salary.

[26]     Robert Corbeil testified that he provided services to the appellant in 1997. He said he had a business, which he carried on under the name of Robert Musique Inc. However, he stated that, during the period at issue, he worked in the appellant's store as a sales clerk and an instrument repairman; he also did deliveries. When he made deliveries, his transportation expenses were paid by the appellant. He worked 20 to 25 hours a week. Moreover, he still works for the appellant. For November and December 1997, he said he received approximately $2,000 from the appellant, which paid him with cheques made out to Robert Musique Inc. There is no need to analyse all of the facts in the light of the decision in Wiebe Door Ltd., supra, because it is quite obvious that Robert Corbeil was employed by the appellant under a contract of service. The method of payment for the services provided, namely through cheques made out to Robert Musique Inc., does not alter the nature of the contract.

[27]     Michel Ménard, another worker, stated that he provided services to the appellant during the period at issue and said that he was a jack of all trades. He did plumbing and maintenance work and also worked in the appellant's store as a sales clerk. He was paid $400 a week for 25 to 40 hours of work. The appellant recorded the hours he worked and his income was adjusted at the end of the year. In 1997, he earned $22,000 of which $19,000 was from the appellant. He admitted that the appellant was never billed for the services he rendered. The cheques were made out to Michel Ménard Enregistré. This method of payment did not affect the nature of the contract; the evidence clearly establishes that Michel Ménard provided services to the appellant under a contract of service.

[28]     Taking all of the circumstances into account, the 25 workers employed by the appellant during the period at issue held insurable employment. The workers and the appellant were bound by a contract of service within the meaning of paragraph 5(1)(a) of the Employment Insurance Act.

[30]     The appeal is dismissed and the Minister's decision is confirmed.

Signed at Ottawa, Canada, this 13th day of March 2001.

"J. F. Somers"

D.J.T.C.C.

Cases cited by the appellant:

-         Wiebe Door Services Ltd. v. The Minister of National Revenue, 87 DTC 5025

-         Augusto H. Martinez v. Her Majesty the Queen, 96 DTC 2017

-         John Henry Avison v. The Minister of National Revenue, 52 DTC 284

-         Richard Bass v. The Minister of National Revenue, 87 DTC 666

-         Jay E. Campbell v. The Minister of National Revenue, CFPL Television, 87 DTC 47;

-         Bernice Bradford v. The Minister of National Revenue, 88 DTC 1661

-         Hôpital St-Luc c. Québec (Ministère du Revenu), [1992] R.D.F.Q. 1, J.E. 92-1304, D.F.Q.E. 92F-69

Cases cited by the respondent:

-         Wiebe Door Services Ltd. v. M.N.R., [1986] 3 F.C. 553 (F.C.A.)

-         Gallant v. M.N.R., A-1421-84 (F.C.A.), May 22, 1986

-         Thomas Alexander McPherson v. M.N.R., (1989) N.R. 91

-         M.N.R. v. Standing, A-857-90 (F.C.A.), September 29, 1992

-         Hennick v. Canada, [1994] T.C.J. No. 407 (T.C.C.)

-         Hennick v. Canada, [1995] F.C.J. No. 294 (F.C.A.)

-         Ecole de Musique aux Petits Oiseaux Inc. c. M. R. N., [1988] A.C.I. No. 415 (T.C.C.)

-         Widdows (c.o.b. Golden Ears Entertainment) v. Canada, [1999] T.C.J. No. 119 (T.C.C.)

-         Ludmer v. Canada, [1995] 2 F.C. 3 (F.C.A.)

Translation certified true

on this 31st day of July 2002.

Erich Klein, Revisor

[OFFICIAL ENGLISH TRANSLATION]

1999-3865(EI)

BETWEEN:

CENTRE DU CLAVIER ALLARD INC.,

Appellant,

and

THE MINISTER OF NATIONAL REVENUE,

Respondent.

Appeal heard on January 30, 2001, at Montréal, Quebec, by

the Honourable Deputy Judge J. F. Somers

Appearances

Counsel for the Appellant:                    Jacques Renaud

Counsel for the Respondent:                Simon Petit

JUDGMENT

          The appeal is dismissed and the Minister's decision is confirmed in accordance with the attached Reasons for Judgment.

Signed at Ottawa, Canada, this 13th day of March 2001.

"J. F. Somers"

D.J.T.C.C.

Translation certified true

on this 31st day of July 2002.

Erich Klein, Revisor

[OFFICIAL ENGLISH TRANSLATION]