Lebel c. M.R.N.

Lebel c. M.R.N. Court (s) Database Tax Court of Canada Judgments Date 2003-10-17 Neutral citation 2003 TCC 693 File numbers 2002-1233(EI) Judges and Taxing Officers Jerome F. Somers Subjects Employment Insurance Act Decision Content Docket: 2002-1233(EI) BETWEEN: CHRISTIAN LEBEL, Appellant, and THE MINISTER OF NATIONAL REVENUE, Respondent. [ORIGINAL ENGLISH TRANSLATION] Appeal heard on August 25, 2003 at Trois-Rivières, Quebec. Before: The Honourable Deputy Judge J. F. Somers Appearances: Counsel for the Appellant: Stéphan Charles-Grenon Counsel for the Respondent: Sébastien Gagné JUDGMENT The appeal is allowed and the decision of the Minister is vacated in accordance with the attached Reasons for Judgment. Signed at Ottawa, Canada, this 17th day of October 2003. "J. F. Somers" Somers, D.J.T.C.C. Translation certified true on this 25th day of March 2004. Shulamit Day-Savage, Translator Citation: 2003TCC693 Date: 20031017 Docket: 2002-1233(EI) BETWEEN: CHRISTIAN LEBEL, Appellant, and THE MINISTER OF NATIONAL REVENUE, Respondent. [ORIGINAL ENGLISH TRANSLATION] REASONS FOR JUDGMENT Somers, D.J. [1] This appeal was heard at Trois-Rivières, Quebec, on August 25, 2003. [2] The Appellant is instituting an appeal from the decision of the Minister of National Revenue (the "Minister") that the employment with Groupe Captel Inc., the Payor, during the period at issue, from August 1, 2000 to July 13, 2001 was insurable because this employment met the requirements of a contract of service; there was an employer-employee relationship between the Appellant and the Payor. [3] Subsection 5(1) of the Employment Insurance Act (the "Act") reads in part as follows: 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. The Appellant must show, on a balance of evidence, that the Minister's decision is unfounded in fact and in law. Each case stands on its own merits. [5] In making his decision, the Minister relied on the following assumptions of fact which were admitted or denied by the Appellant: [translation] (a) The Payor operated a telecommunications service and installation business; (admitted) (b) The Payor conducted business under the corporate name of Servitel; (denied) (c) The Payor's clients were Rogers, AT & T, Cantel, Hydro-Québec; (denied) (d) The Payor hired between 60 and 80 employees per year; (denied) (e) The Appellant is an electronics and telecommunications technician; (denied) (f) The Appellant had been a salaried employee of the Payor since 1994; (admitted) (g) In August 2000, the Appellant asked the Payor to be considered self-employed; (denied) (h) The Appellant's duties involved installing or repairing electronic equipment on site and, on occasion, in a workshop; (denied) (i) During the period at issue, the Appellant was providing services only to the Payor; (denied) (j) The Appellant did not register his business name; (denied) (k) The Appellant is not a member of any professional organization; (admitted) (l) The clients were clients of the Payor; (denied) (m) The Appellant was contacted by the Payor and the Appellant would make a submission for the work to be done; (denied) (n) The Appellant carried out the same type of work as the Payor's salaried technicians; (denied) (o) The Appellant had a work schedule that was the same as the Payor's other technicians; (denied) (p) The Appellant could not be absent without notifying the Payor; (denied) (q) The Payor set the Appellant's deadlines; (denied) (r) The Appellant was required to submit technical reports to the Payor; (denied) (s) The Appellant's work was verified by the Payor's engineer, by the Payor's test technicians or by the Payor's clients; (denied) (t) The Appellant could not have his work done by someone else without the Payor's approval; (denied) (u) If the Appellant needed assistance, the Payor assumed the cost by providing him with his own technical personnel; (denied) (v) The Appellant billed the Payor at an hourly rate; (denied) (w) The Appellant used the Payor's vehicles and occasionally his own vehicle for travel; (denied) (x) The Appellant's travel costs for lodging, meals and mileage were reimbursed by the Payor when the Appellant used his own vehicle; (denied) (y) The Appellant used his own tool box; (admitted) (z) All material, wire, connections, components were provided by the Payor; (denied) (aa) The testing equipment used by the Appellant belonged to the Payor; (denied) (bb) The Appellant's work was an integral part of the Payor's activities. (denied) [6] The Payor operated a telecommunications equipment service and installation business under the name "Servitel" and employed between 60 and 80 employees per year. [7] The Payor's clients were Rogers, AT & T, Cantel and Hydro-Québec. [8] The Appellant testified that he was an electronics and telecommunications technician, as well as an engineer and a licensed electrician. [9] The Appellant admitted that he was a salaried employee of the Payor from 1994 to 1998. The Appellant notified the Payor of his intention to become self-employed. However, he continued to do work for clients of the Payor. As stated in a letter from Jean-Pierre Séguin, Director of Engineering and Estimates, dated April 23, 2002, submitted as Exhibit A-1 (Appellant's evidence book), the Payor agreed to this arrangement. [10] From 1994 to 1998, the Appellant, as a salaried worker, received an hourly rate between $12.00 and $14.35. The Appellant explained that during the period at issue he billed the Payor for the work at an hourly rate of $35 while working in the field, and an hourly rate of $23 while working at the workshop. [11] He added that he had to cover his own expenses, such as maintenance on his own vehicle. The area he covered included Quebec, Nova Scotia, James Bay and the United States. [12] His duties involved installing or repairing electronic equipment on site, and occasionally in the workshop: 90% of his work was done on site and 10% at the workshop. [13] The Appellant explained that, during the period at issue, while providing services to the Payor, he was looked for clients. He submitted as evidence Exhibit A-1, a list of potential clients that he had solicited from 1998 to 2001. One such potential client was Hydro-Québec, which confirmed receipt, by letter dated May 1, 2000, of his form for registration as a potential supplier. [14] He mentioned that he worked 50% of the time for the Payor during the period at issue whereas prior to that, as a salaried employee of the Payor, he devoted 100% of his time. [15] The Appellant only registered his business name on October 1, 2001 (Exhibit A-2). He received his TVQ registration certificate on November 12, 1998. [16] The Appellant had an insurance policy that had been issued on August 18, 1998 and which, at his request, was cancelled on September 17, 2001. However, during the period at issue, he was covered by the Payor's public liability insurance. [17] Prior to 1998, he used one of the Payor's vehicles, but then used his own vehicle for his work and was responsible for the maintenance costs. [18] The Appellant acquired a computer, a cellular phone, a fax machine, a fax line and three telephone lines. This equipment was installed in a room at his residence. [19] During the period at issue, the work was done on location, for Rogers, AT & T, Cantel and Hydro-Québec, who were clients of the Payor. [20] According to the Appellant, he often telephoned Jean-Pierre Séguin at the Payor's office to get contracts, and sent him submissions for work to be done. [21] The Appellant explained that, prior to 1998, he was a test technician, but that during the period at issue he became a technician. [22] According to the Appellant, he did not have a fixed work schedule at the Payor's during the period at issue and he was not involved in teamwork. He added that he could be absent if he so liked. [23] The Appellant denied that he had deadlines to meet except for those imposed by the Payor's clients. [24] The Appellant submitted technical reports to his clients and to the Payor, but this was not an intrinsic part of his work. He added that his work was not supervised. In addition, if he had to re-do work, it was at his expense. [25] The Appellant admitted that he never hired anyone to do his work and to this effect he refers to paragraphs 7 and 9 of the letter dated April 23, 2002 from Jean-Pierre Séguin confirming that the Appellant always carried out all the work according to the plans and specifications and that he was never absent and he never had himself replaced. In addition, according to this letter, the Appellant never used the Payor's engineering services. [26] The Appellant explained that he did not use the help of the Payor's employees. Jean-Pierre Séguin, in his letter dated April 23, 2002, wrote the following: [translation] I never provided Christian Lebel with the opportunity to use our employees in order to help him do contract work. However, I have used his services in the past to work by the hour in cooperation with our own employees. [27] The Appellant stated that 70% of the work was performed for lump sum payments (see letters addressed to the Payor dated November 15 and 17, 2001, Exhibit A-1). The rest of the time the Payor was billed by purchase orders and on these invoices (Exhibit A-1) the GST and TVQ amounts are indicated. [28] The Appellant was responsible for his lodging costs (which were included in his lump sum). As way of example, he provided invoices 0102B and 0103 dated February 20 and March 5, 2001 submitted as Exhibit A-1. When there was complicated work of indefinite duration, the truck rental and associated expenses (gas, insurance, etc.) were extra. [29] The Appellant admitted that he owned his own toolbox, but that the Payor provided the specialized material and equipment, which was of considerable value. [30] On cross-examination, the Appellant stated that he did not refuse contracts from the Payor, who was his only client during the period at issue. He added that he had made an effort to obtain other contracts and clients. [31] The Appellant admitted that he did not register his business name before October 1, 2001, which is after the period at issue. [32] During the period at issue, the Appellant had personal injury insurance, but was covered by the liability insurance paid for by the Payor. [33] The Appellant admitted on cross-examination that he sometimes did team work, for which he was paid an hourly rate. He admitted that he submitted reports to the Payor. [34] According to invoice 0102B dated February 20, 2001, the materials and the vehicle were provided by the Payor. He explained that he car-pooled because the site was located in Chibougamau, Quebec. [35] The Appellant was the only witness for the Appellant party. [36] Jean-Pierre Couture, Vice-president of Finance for the Payor, was the witness for the Respondent. This witness has been an employee of the Payor for 21 years. [37] According to this witness, the Appellant was a test technician for the Payor before 1998, and in August 1998 he became an installation technician and in this capacity; he did wiring and electronic repairs. [38] He stated that 90% of the work was done on site and that the hourly rate was established by the client. [39] Taking his availability into account, the Appellant had the same work schedule as the other employees. [40] The specialized and expensive tools were the Payor's property. The materials (cable, electrical wiring, etc.) were provided by the Payor, as were the vehicles. However, when the Appellant used his own vehicle, he billed the mileage to the Payor. In addition, the Appellant billed the Payor for lodging. [41] The Appellant billed the Payor every month, at an hourly rate or for a lump sum. He was therefore paid every month. [42] The Appellant was required to notify the Payor if he had to be absent and in this case he was replaced by an employee of the Payor. [43] On cross-examination, Mr. Couture admitted that he did not negotiate working conditions with the Appellant, which was Mr. Séguin's responsibility. [44] He admitted that he was responsible for the Payor's finances and not employee supervision. [45] This witness admitted that if the Appellant was required to re-do work, he did so at his own expense. The Appellant could provide his services to other clients and had the freedom to refuse contracts with the Payor. [46] The hourly rate for the Payor's technicians was $20/hour and the Payor paid premiums to the Commission de la santé et de la sécurité au travail (CSST), and paid other fees. [47] The Appellant billed the Payor at an hourly rate of $35 and the Payor did not pay CSST premiums. However, the Payor's liability insurance covered the Appellant. The Appellant was not paid for overtime except perhaps on one occasion. [48] During the period at issue, there were five invoices at an hourly rate and seven for a lump sum. [49] The Appellant's attorney sent the undersigned a letter dated August 28, 2003, after conclusion of the evidence, by which he desired to expand the Appellant's testimony with respect to his salary, his income and deductions, for the period ending June 27, 1998. [50] The Respondent's attorney objected to the investigation being re-opened with the presentation of this document. The objection is upheld because the Appellant had plenty of opportunity to present this evidence at the hearing for this case. [51] Jean Vézina, Appeals Officer since 1985, testified in this case and submitted his report, dated January 28, 2002, as Exhibit I-1. [52] His investigation involved telephone conversations with the Appellant on October 23, 2001 and January 7, 2002 and with Jean-Pierre Couture, Vice-president of Finance for the Payor, on November 30, 2001 and January 14, 2002. [53] In paragraph 5 of his report, this witness emphasized: [translation] The Appellant was required to make a submission to the Payor before working for the Payor's clients, he had the opportunity to refuse a job. All work done by the Appellant was for clients of Groupe Captel. They could check the Appellant's work while it was being done, and they set the time periods and deadlines to meet. [54] On page 5 of his report, under the heading [translation] "Important note", he wrote: [translation] It should be noted that the Appellant did not change his job description in any way, he only wanted to change his working status. In addition, we noted several contradictions made by the parties with respect to the following facts, notably: - the Appellant's task description, - the work schedule, - availability, - supervision of work conducted, - equipment used, - addition of assistance at work, - notification of absence from work. [55] In order to distinguish between a contract of service and a contract for services, all the various elements that make up the relationship between the parties must be examined. It is well established that there are four basic elements for making this distinction: (a) the degree or absence of control by the employer; (b) ownership of tools; (c) chances of benefit and risks of loss; and (d) integration of the employee's work in the Payor's business (see Wiebe Door Services v. M.N.R., [1986] 3 F.C. 553). [56] The Appellant worked for the Payor as a salaried employee between 1994 and 1997 and in 1998, the Appellant wanted to established his own business and to be considered self-employed. The Payor, through Jean-Pierre Séguin, agreed that the Appellant would work as a self-employed worker, as demonstrated in the letter dated April 23, 2002 (Exhibit A-1) and this confirmed the verbal agreement between the parties for the period following 1998, including the period at issue. [57] The evidence shows that the Appellant worked exclusively for the Payor during the period at issue. [58] In Katherine Rudzik and M.N.R. (No. 97-532(UI)), O'Connor J. of this Court referred to Wiebe Door Services Ltd. v. M.N.R., [1986] 3 F.C. 553 and cited the following passage: As Bendel points out, supra, [professor Michael Bendel in The dependent contractor: An unnecessary and flawed development in Canadian Labour Law (1982), 32 U.T.L.J. 374] the organization test is now "firmly established in Canada". He explains its attractiveness as follows . . . In [sic] seems patently obvious to this Board that a particular business will not flourish in circumstances where growth is totally integrated with the operations of a particular customer. The essence of resolving and distinguishing the contractor from the employee is his independence . . . In instances where the driver's means of financial support is [sic] inextricably bound up with the respondent we are of the view that he cannot be considered an independent contractor. By analysing all the various elements that make up the relationship between the parties, O'Connor J. concluded that, in the above noted case, the Appellant had been hired under a contract for services. [59] Therefore, in the case at bar, the fact that the Appellant worked exclusively for the Payor during the period at issue is not determinative. The four tests outlined above must also be analysed. Control [60] In Vulcain Alarme Inc. v. M.N.R. (No. A-376-98), the Federal Court of Appeal said the following: In our opinion, all these points of fact are also consistent with a contract of enterprise. A contractor who, for example, works on site on a subcontract does not serve his customers but those of the payer, that is the general contractor who has retained his services. The fact that Mr. Blouin had to report to the plaintiff's premises once a month to get his service sheets and so to learn the list of customers requiring service, and consequently the places where his services would be provided, does not make him an employee. A contractor performing work for a business has to know the places where services are required and their frequency just as an employee does under a contract of employment. Priority in performance of the work required of a worker is not the apanage of a contract of employment. Contractors or subcontractors are also often approached by various influential customers who force them to set priorities in providing their services or to comply with the customers' requirements. . . . Fixing the amount of remuneration or defining the purpose of the exercise is not controlling work. These aspects exist in a contract for services as much as in a contract of service. It is still more the case that control does not lie in the act of payment, whether by cheque or otherwise. The same is true, of course, of reimbursement for expenses and the inevitable billing system associated with it. In the case at bar the evidence did not disclose that the plaintiff controlled Mr. Blouin by giving him orders and instructions in the way his work was to be done. On the contrary, the latter was complete master of the way in which he provided his services, except that they had to be done within 30 days. No one imposed any control on him or exercised any supervision over his provision of the services, and Mr. Blouin set his own schedule. . . [61] In the case at bar, the Appellant set two hourly rates, $35 for sites and $23 for workshop, and these rates were accepted by the Payor. [62] The Appellant was subsequently required to submit a report demonstrating the hours worked and the agreed rate. The Appellant added amounts for GST and TVQ to the invoices, as well as for his travel costs (mileage and lodging costs). [63] The Appellant testified that he was not supervised by the Payor's engineer, contrary to the testimony of Jean-Pierre Couture. It should be noted that Jean-Pierre Couture was the Vice-president of the business and did not go to the sites; therefore the Appellant's statement on this point must be accepted, since the Appellant is a credible witness. [64] Jean-Pierre Séguin, in a letter dated April 23, 2002, wrote the following at paragraph 9: [translation] As a self-employed worker, Christian Lebel did not ask for nor did he use the services of our engineers. This was not required since he only installed equipment in accordance with the specifications provided. [65] The Appellant made the Payor aware of his availability. Sometimes he worked alone and sometimes on a team. If the Appellant was absent he was required to notify the Payor who would find a replacement, but, according the letter from Jean-Pierre Séguin, this situation never arose. [66] With respect to the Appellant's work schedule, Jean-Pierre Séguin wrote the following in the letter of April 23, 2002: [translation] As with all subcontractors, Christian Lebel was subject to a deadline, but no work schedule was set by us. However he did have to comply with the conditions of the agreement between us and our client (night work on occasion). [67] In case law, the degree of control over the worker is an important test for determining the nature of the employment contract between the parties. According to the evidence, the Court cannot but conclude that the Payor had control over the Appellant's work. (b) Ownership of tools [68] In Vulcain Alarme Inc. c. M.N.R. (No. A-376-98), the Federal Court of Appeal said the following: There remains the question of the special detection equipment supplied by the plaintiff. Two comments should be made in this connection. First, this special equipment is not available on the market and Mr. Blouin could not obtain it for himself. Second, in view of the question of "security" involved and the fact that the plaintiff would have been liable in the event of a breakdown, the latter wanted to have strict control over the special detection equipment to ensure that it was reliable and to comply with the regulatory standards applicable to it. In such circumstances there is certainly nothing strange about the plaintiff requiring in its contract of enterprise that the contractors whose services it employs use a specialized tool which it supplies them. This single specification or requirement by the plaintiff does not have the effect of transforming a contract of enterprise into a contract of employment. We adopt on this point the following remarks by our brother Décary J.A. in Charbonneau v. Canada (Minister of National Revenue - M.N.R.), [1996] F.C.J. No. 1337, 1, at 2: 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. [69] In the case at bar, the Appellant testified that he had a computer, three telephone lines, including a cell phone and a business line. He also owned a fax and a telephone line for it, and an office in his home. He owned his toolbox which he had bought from the Payor. The Payor paid the Appellant for mileage, costs associated with the use of his truck and for travel to the work sites. The Payor provided the Appellant with specialized equipment worth $70,000; materials were provided by the Payor. [70] In light of the decision by the Federal Court of Appeal in Vulcain Alarme, supra, all of the facts related to ownership of tools and/or equipment tend to demonstrate that there was more likely a contract for services than a contract of service. (c) Chances of benefit and risks of loss [71] The Appellant had some lump sum contracts and others at an hourly rate. If he made an error in calculating the lump sum, he assumed a loss or made a profit. If the Appellant had to re-do work, he did so at his expense. In addition, the Appellant was not paid for overtime, therefore he could experience a loss. [72] In the letter of April 23, 2002, Jean-Pierre Séguin said the following: [translation] None of the lump-sum contracts we had ever had the price changed as the result of an unforeseen decrease or increase in the hours of work needed to complete the contract. Christian Lebel never asked for or obtained any additional money for the contracts obtained from our business. Nor were there any codicils to any of the contracts between us. [73] In accordance with these facts, the Appellant would be bound by a contract for services. (d) Integration of the employee in the employer's business [74] The Appellant and the Payor agreed in 1999 that the Appellant would become a self-employed worker and for this purpose, on November 12, 1998, a TVQ registration certificate was obtained. On the invoices submitted to the Payor, the Appellant added an amount for the GST and the TVQ and the Payor accepted them. The fact that the individual operating the sole proprietorship only registered it on October 1, 2001 cannot affect the nature of the business. [75] In addition, the fact of having carried out contracts exclusively for the Payor during the period at issue cannot affect the nature of a self-employed worker. The Appellant made an effort to establish a clientele and this effort shows his intention to do business with clients other than those of the Payor. Under this test, the Court concluded that the Appellant was self-employed. [76] In light of the overall relationship between the parties, the Court concludes that the Appellant and the Payor were bound by a contract for services under the Act. [77] The Appellant was self-employed while carrying out work for the Payor during the period at issue. [78] The appeal is allowed and the decision of the Minister is vacated. Signed at Ottawa, Canada, this 17th day of October 2003. "J. F. Somers" Somers, D.J.T.C.C. Translation certified true on this 25th day of March 2004. Shulamit Day-Savage, Translator