2945-5557 Quebec Inc. v. M.N.R.

2945-5557 Quebec Inc. v. M.N.R. Court (s) Database Tax Court of Canada Judgments Date 2005-08-25 Neutral citation 2005 TCC 546 File numbers 2004-4813(EI) Judges and Taxing Officers Cameron Hugh McArthur Subjects Employment Insurance Act Decision Content Docket: 2004-4813(EI) BETWEEN: 2945-5557 QUÉBEC INC., Appellant, and THE MINISTER OF NATIONAL REVENUE, Respondent, and JEAN MELKI, Intervenor. Appeal heard on May 6, 2005, at Montréal, Québec, by The Honourable Justice C.H. McArthur Appearances: Agent or the Appellant: Richard Venor Counsel for the Respondent: Natalie Goulard Counsel for the Intervenor: Oliver Cabral JUDGMENT At the commencement of the hearing, the agent for the Appellant and counsel for the Respondent consented to Judgment in this matter; And after hearing the submissions by counsel for the Intervenor; The appeal pursuant to subsection 103(1) of the Employment Insurance Act is allowed and the decision of the Minister on the appeal made to him under section 92 of the Act is vacated on the basis that Jean Melki was not employed in insurable employment for the period September 12, 2003 to January 2, 2004. Signed at Ottawa, Canada, this 25th day of August, 2005. "C.H. McArthur" McArthur J. Citation: 2005TCC546 Date: 20050825 Docket: 2004-4813(EI) BETWEEN: 2945-5557 QUÉBEC INC., Appellant, and THE MINISTER OF NATIONAL REVENUE, Respondent, and JEAN MELKI, Intervenor. REASONS FOR JUDGMENT McArthur, J. [1] This appeal is from a decision of the Minister of National Revenue (the Minister) under the Employment Insurance Act and the Canada Pension Plan that Jean Melki, the intervenor, was employed in insurable and pensionable employment while working for the Appellant as a taxi driver from September 12, 2003, to January 2, 2004. The case proceeded in both French and English and accordingly, under section 20 of the Official Languages Act, the judgment is issued simultaneously in both official languages. [2] Immediately before the commencement of the trial, the Respondent consented to the Appellant's position and withdrew from the proceeding. The Intervenor, Mr. Melki, through his counsel vigorously opposed the Appellant counsel's motion to deny Mr. Melki a hearing. The Appellant's position was that the Intervenor was not a party to the action and had no right to a hearing after the Minister had consented to judgment. Further, the Minister had consented to judgment in another appeal under similar circumstances involving the same Appellant which was set down to be heard by me immediately after the present hearing. The worker had not intervened as in the present case. The Minister's reversal of positions was based on the decision in Yellow Cab Company Limited v. M.N.R.,[1] a decision of the Federal Court of Appeal. [3] Somewhat reluctantly and out of fairness to the intervenor (taxi driver) who was represented by counsel, I denied the Appellant's motion and permitted the Intervenor to present his evidence. The Respondent's counsel did not participate in the hearing and Mr. Melki, and Mr. Benoit Jugand on behalf of the Appellant, testified. For the most part, the assumptions of fact set out in the Reply to the Notice of Appeal are accurate and state the following: (a) The Appellant operates a taxi business in the Montreal area; (b) The Appellant owns 9 taxi vehicles which it leases to drivers; two vehicles are part of a taxi association and have a two-way radio and come with a dispatch service, the other vehicles are classified as A-11 vehicles and have neither a two-way radio nor a dispatch service; (the Appellant did not have this service) (c) The Appellant possesses all the required taxi permits and licenses for the vehicles from the regulatory agencies; (d) The Appellant negotiates with the drivers the terms of the lease agreement for the vehicles; (e) The Appellant leases the vehicles to the drivers for a fixed daily or weekly fee (approx. $52/day); (f) The drivers, who lease a vehicle for five days, have the right to keep it for the entire week and to use the vehicle for personal reasons; (g) The Appellant pays for all repairs and maintenance of the vehicle as well as insurance costs; (h) The drivers must keep the vehicle clean and pay their fuel costs; (i) During the period under revue, the Worker leased a taxi vehicle from the Appellant for a fixed weekly fee of $280; (j) The Worker leased a vehicle that did not have a radio or a dispatch service; (k) The Worker and the Appellant did not sign a written contract concerning the leasing of the vehicle; (i) The taxi had to be operated in the Montreal area (A-11 area) and the Worker was responsible for finding his own clients; (m) The Worker was obliged to operate the taxi vehicle personally, he could not substitute a replacement driver for himself; (n) The Worker kept all fares collected and was not required to provide the Appellant with any log sheets, reports or accounting related to the operation of the vehicle; (o) The Worker was required to respect the fare rate and fees established by the taxi regulatory agencies; (p) The Worker was allowed to use the vehicle for personal use; (q) The Worker was obliged to operate the taxi vehicle personally and he could not sublet it to another driver; (r) The Appellant owned 100% of the taxi vehicle and he was its registered owner; [4] The Intervenor's position is that he is deemed to be an employee of the Appellant pursuant to paragraph 6(e) of the Employment Insurance Regulations (Regulations) to the Employment Insurance Act (Act) and that his situation can be distinguished from Yellow Cab in that he (Mr. Melki) could not sublet his cab to another driver. [5] The Intervenor relies on paragraph 6(e) of the Regulations to the Act which provides that persons employed as a driver of a taxi are included in insurable employment unless specifically excluded. The Appellant relies on the exclusion in paragraph 6(e) which provides that a taxicab driver is excluded from the deemed inclusion in insurable employment when that driver is the owner or operator of the business. Mr. Melki was a lease operator. [6] The Appellant's counsel provided numerous and lengthy arguments but I will first deal with the Intervenor's position and whether or not I am bound by Yellow Cab Company Ltd. c. Canada[2]as concluded by the Minister. [7] In Yellow Cab, the Federal Court of Appeal found that the lease operators were exempt from the deeming provisions of paragraph 6(e) and were not employees. The Respondent considered the facts in this case similar to those in Yellow Cab and withdrew his support for Mr. Melki who was left to make his argument without the Respondent's support. [8] In Yellow Cab, the issue included whether the lease operators associated with Yellow Cab were owners or operators of their own business within the meaning of paragraph 6(e) of the Regulations. Sexton J.A. writing for the majority repeated the steps set out by the Supreme Court of Canada in 671122 Ontario Limited v. Sagaz Industries Canada Inc.[3] wherein Major J. found:[4] ... the central question is "whether the person who has been engaged to perform the services is performing them as a person in business on their own account". [9] I believe that the primary, if not only, difference in the facts in Yellow Cab from the present case is that in Yellow Cab, the drivers could delegate or sublet the driving of their leased cabs where Mr. Melki could not although this is not entirely accurate. In Yellow Cab, the lease operators could not sublet without the approval of the cab owner. This is not unlike the situation of Mr. Melki. While Mr. Melki did not have the privilege of subletting his vehicle, it can be inferred that he could have sublet it with the Appellant's permission. [10] Taking all other factors into account, this possible difference does not weigh heavily in my decision. I have no doubt that the ownership of tools and risk of loss and chance of profit tests[5] favours a finding that the Intervenor (lease operator) performed his services "as a person on their (his) own account".[6] [11] Mr. Milke leased his vehicle for a fixed weekly fee. He could keep it for the entire week and use it for business or personal reasons. He paid for his own gas. His obligation to keep the vehicle clean was imposed by the City of Montrealtaxi regulations. He did not hire a radio or dispatch service. But for having to operate in the Montrealarea, he drove it without any restrictions imposed by the Appellant and was responsible for finding his own clients. He kept all fares he collected and was not required to provide the Appellant with any log sheets, reports or accounting related to his operation of the vehicle. He drove his lease cab where, when and how he wanted. The control exercised by the owner in the Yellow Cab case was far greater than that by the Appellant in the present case. [12] In Yellow Cab, the lease operators were: [25] ... obligated to comply with all orders or directions to the lease-operators with respect to dispatch services and the general operation of the taxicabs; the lease-operators are obligated to diligently operate the taxicab on a continuous basis; and the lease-operators are obligated to use Yellow Cab's bookkeeping and fuel provision services. Yellow Cab can order the suspension or discharge of drivers in breach of any rules or regulations of Yellow Cab or of any municipality or other regulatory body. The taxicab may only be driven by the lease-operator or by a driver approved by Yellow Cab. These facts tend to evidence such a degree of control by Yellow Cab as to favour indicating that the lease operators were employees. Civil Code of Quebec [13] In the case of Lévesque c. Le Ministre du revenue national[7] et Nicole St-Jules, Dussault J. concluded that the definitions in the Civil Code of Québec must be considered in determining whether or not there was a contract of service or for service for a worker in the province of Québec. He found that the dominating factor is the existence or not of a relationship of subordination. He continues by setting out criteria to assist in determining the presence or absence of a relationship of subordination as follows:[8] [TRANSLATION] [60] According to the case law, in order for there to be a contract of employment, there has to be supervision and direct control. Merely giving general instructions on how the work is to be done, or reserving the right to inspect and oversee the work, is not enough to turn the agreement into a contract of employment. [61] A series of criteria developed by the case law enables the court to determine whether or not there is a relationship of subordination between the parties. [62] The criteria for control include: - mandatory workplace attendance - compliance with work schedule - recording of worker absences for vacation purposes - submission of activity reports - control over quantity and quality of work - prescribed way of doing work - power to discipline worker for poor performance - source deductions - benefits - status reported by worker on income tax returns - exclusivity of service to employer [14] I have no doubt that the control tests lead to the conclusion that Mr. Milke was not an employee. In Yellow Cab, the Court found the degree of control favoured the position that the operators were employees mainly because the lease operators were obliged to comply with all orders or directions with respect to dispatch services and the general operation of the taxicabs. Mr. Milke did not have most of the following restrictions set out by Sextion J.A.:[9] ... the lease-operators are obligated to diligently operate the taxicab on a continuous basis; and the lease-operators are obligated to use Yellow Cab's bookkeeping and fuel provision services. Yellow Cab can order the suspension or discharge of drivers in breach of any rules or regulations of Yellow Cab or of any municipality or other regulatory body. Despite these controls, the Federal Court of Appeal found that the lease operators were not employees. [15] While the Civil Code would appear to limit the tests to only the control test, the broad criteria for control in Seitz, supra, seems to encompass all the tests set out in Wiebe Door Services Ltd. v. M.N.R.[10] Briefly, dealing with the Seitz tests in paragraph form, I find that Mr. Milke had no obligation to show up for work, he had no specific working hours, there was no control of his absence concerning vacation pay, he did not have to report to the Appellant, the Appellant had very little control of the quality of his driving or the hours he worked. He was an experienced taxi driver and he drove who he wanted, when he wanted, how he wanted and where he wanted. He handled his own income and remittances. The driving services he performed were for himself. Obviously, he had to pay for the car rental which included repairs and insurance. I find that Mr. Milke was not an employee but an independent contractor and as such, as a lease operator he was exempt from the deeming provisions of paragraph 6(e). Signed at Ottawa, Canada, this 25th day of August, 2005. "C.H. McArthur" McArthur J. CITATION: 2005TCC546 COURT FILE NO.: 2004-4813(EI) STYLE OF CAUSE: 2945-5557 Québec Inc. and The Minister of National Revenue and Jean Melki PLACE OF HEARING: Montreal, Quebec DATE OF HEARING: May 6, 2005 REASONS FOR JUDGMENT BY: The Honourable Justice C.H. McArthur DATE OF JUDGMENT: August 25, 2005 APPEARANCES: Agent for the Appellant: Richard Venor Counsel for the Respondent: Natalie Goulard Agent for the Intervenor: Oliver Cabral COUNSEL OF RECORD: For the Appellant: Name: N/A Firm: N/A For the Intervenor: Name: Oliver Cabral Firm: Saint-Aubin & Associés For the Respondent: John H. Sims, Q.C. Deputy Attorney General of Canada Ottawa, Canada [1] 2002 FCA 294. [2] 2002 CAF 294 [3] [2001] S.C.J. No. 61. [4] supra, at paragraph 23. [5] Referred to in Sagaz but taken from the Federal Court of Appeal decision in Wiebe Door Services Ltd. v. M.N.R., [1986] 3 F.C. 553. [6] The central question referred to by Major J. in Sagaz. [7] 2005CCI248. [8] Taken from Seitz c. Entraide populaire de Lanaudière inc., Court of Quebec (Civil Division), No.705-22-002935-003, 16 November 2001, [2001] J.Q. No. 7635 (Q.L.), Judge Monique Fradette of the Court of Quebec. [9] Yellow Cab Company Ltd. at paragraph 25. [10] [1986] 3 F.C. 553.