Québec (Commission de la construction) v. Canada (Minister of National Revenue)

Québec (Commission de la construction) v. Canada (Minister of National Revenue) Court (s) Database Federal Court of Appeal Decisions Date 2006-02-08 Neutral citation 2006 FCA 49 File numbers A-9-05 Decision Content Date: 20060208 Docket: A-9-05 Citation: 2006 FCA 49 CORAM: LÉTOURNEAU J.A. NOËL J.A. NADON J.A. BETWEEN: COMMISSION DE LA CONSTRUCTION DU QUÉBEC Appellant and MINISTER OF NATIONAL REVENUE Respondent Hearing held at Québec, Quebec, on January 24, 2006. Judgment delivered at Ottawa, Ontario, on February 8, 2006. REASONS FOR JUDGMENT: NOËL J.A. CONCURRED IN BY: LÉTOURNEAU J.A. NADON J.A. Date: 20060208 Docket: A-9-05 Citation: 2006 FCA 49 CORAM: LÉTOURNEAU J.A. NOËL J.A. NADON J.A. BETWEEN: COMMISSION DE LA CONSTRUCTION DU QUÉBEC Appellant and MINISTER OF NATIONAL REVENUE Respondent REASONS FOR JUDGMENT NOËL J.A. [1] This is an appeal from a decision by Madam Justice Lamarre Proulx of the Tax Court of Canada, dismissing four appeals heard on common evidence and confirming the decision by the Minister of National Revenue (the Minister) that the Commission de la Construction du Québec (the appellant or the Commission) had the obligations of an employer under the Employment Insurance Act, S.C. 1996, c. 23, (the EIA) with respect to the sums that it paid to workers during the period at issue. [2] The amounts in question were paid by the Commission over the years 1997 to 2001 to several thousand workers in the context of a mandate conferred by the An Act respecting labour relations, vocational training and manpower management in the construction industry, R.S.Q., c. R-20, (Act R-20). [3] The Commission claims that it did not "pay" or "remit" these amounts to the employees as required by the EIA. Rather, it turned over to the employees the amounts owing to them after recovering them from their employers. In its opinion, therefore, Lamarre Proulx J. erred in confirming the Minister's decision. The facts [4] The Commission is a corporation incorporated under Act R-20, which applies to employers and employees of the construction industry all over Quebec. The workers in the field of construction contemplated by Act R-20 are excluded from the majority of protection mechanisms provided under the Act respecting labour standards, R.S.Q., c. N-1.1. (The Commission des normes du travail is not authorized under its own legislation, i.e. the Act respecting labour standards, to represent employees in the construction field.) [5] The Commission oversees the application of collective agreements falling under its jurisdiction, including the provisions dealing with employee earnings. This mandate is meant to ensure that the workers receive the salary that is due to them and prevents unfair competition in the construction industry. [6] For that purpose, section 81 of Act R-20 authorizes the Commission to exercise certain recourse on behalf of employees when those employees are not paid in accordance with what is promised to them under the applicable collective agreement. It may, inter alia, recover those amounts from any reticent employer. [7] When the Commission recovers a sum due to an employee following a judgment or otherwise, it pays the employee that amount. However, if the action brought by the Commission proves to be unsuccessful, the Commission does not become in any way liable for the sums that were payable by the employer to the employee, and the employee does not have any recourse against the Commission. [8] Since 1977, the Commission (at that time the Office de la construction du Québec) agreed to make deductions at source for the income tax payable by the employees on the amounts paid to the employees. However, that agreement does not extend to deductions for employment insurance (formerly unemployment insurance). [9] Beginning in 1997, the Minister claimed from the Commission the employment insurance deductions on the basis that, according to the EIA, the Commission was the employer of the employees to whom it remitted the amounts collected in the context of its statutory mandate and that in that capacity it had to make those deductions. [10] Without acknowledging the validity of the assessments, the Commission informed the Minister on November 24, 2000, that it would thereafter deduct the employment insurance premiums on the amounts that it recovered from employers and paid to the employees, until the final disposition of this dispute (Appeal Book, vol. 1, p. 50). [11] At issue in this case are the deductions applicable to the amounts paid for the period in question (1997 to 2001). [12] In a decision dated December 17, 2004, the Tax Court of Canada dismissed the initial appeal by the Commission. That is the decision under appeal. Statutory framework [13] Subsection 108(1) of the EIA authorizes the Minister to make regulations with respect to some classes of deemed employers: Regulations Regulations Regulations Regulations 108(1) The Minister may, with the approval of the Governor in Council, make regulations 108(1) Le ministre peut, avec l'agrément du gouverneur en conseil, prendre des Régulations : ... [...] (f) providing that, in any case or class of cases where insured persons work f) prévoyant qu'en tout cas ou toute catégorie de cas où des assurés travaillent: (i) under the general control or direct supervision of or are paid by a person other than their actual employer, or (i) soit sous la direction générale ou la surveillance directe d'une personne qui n'est pas leur véritable employeur ou sont payés par une telle personne, (ii) with the concurrence of a person other than their actual employer on premises or property with respect to which that person has any rights or privileges under a license, permit or agreement, (ii) soit de l'assentiment d'une personne qui n'est pas leur véritable employeur dans des lieux ou locaux sur lesquels cette personne a certains droits ou privilèges aux termes d'une licence, d'un permis ou d'une convention, the other person is, for the purposes of paying premiums, deemed to be the employer of the insured persons in addition to the actual employer, and providing for the payment and recovery of premiums paid for the insured persons; cette personne est réputée, aux fins de versement des cotisations, être l'employeur de ces assurés conjointement avec le véritable employeur, et prévoyant en outre le paiement des cotisations pour ces assurés et, le cas échéant, le remboursement des cotisations faisant double emploi; ... [...] [Emphasis added.] [14] In that respect, the Insurable Earnings and Collection of Premiums Regulations, SOR/97­33, (the Regulations) stipulate: INTERPRETATION DÉFINITIONS ET INTERPRÉTATION ... [...] 1(2) For the purposes of Part IV of the Act and for the purposes of these Regulations, "employer" includes a person who pays or has paid earnings of an insured person for services performed in insurable employment. 1(2) Pour l'application de la partie IV de la Loi et pour l'application du présent Régulation, « employeur » s'entend notamment d'une personne qui verse ou a versé la rémunération d'un assuré pour des services rendus dans l'exercice d'un emploi assurable. ... [...] Other Deemed Employers Autres employeurs présumés 10(1) Where, in any case not coming within any other provision of these Regulations, an insured person works 10(1) Lorsque, dans un cas non prévu par le présent Régulation, un assuré travaille: (a) under the general control or direct supervision of, or is paid by, a person other than the insured person's actual employer, or a) soit sous la direction générale ou la surveillance directe d'une personne qui n'est pas son véritable employeur, ou est payé par une telle personne, (b) with the concurrence of a person other than the insured person's actual employer, on premises or property with respect to which that other person has any rights or privileges under a license, permit or agreement, b) soit avec l'assentiment d'une personne qui n'est pas son véritable employeur dans un lieu ou un local sur lequel cette personne a certains droits ou privilèges aux termes d'une licence, d'un permis ou d'une convention, that other person shall, for the purposes of maintaining records, calculating the insurable earnings of the insured person and paying, deducting and remitting the premiums payable on those insurable earnings under the Act and these Regulations, be deemed to be the employer of the insured person in addition to the actual employer. cette personne est réputée, aux fins de la tenue des registres, du calcul de la rémunération assurable de l'assuré ainsi que du paiement, de la retenue et du versement des cotisations exigibles à cet égard aux termes de la Loi et du présent Régulation, être l'employeur de l'assuré conjointement avec le véritable employeur. (2) The amount of any employer's premium paid by the person who is deemed to be the employer under subsection (1) is recoverable by that person from the actual employer. (2) Le montant de la cotisation patronale payée par la personne réputée être l'employeur en vertu du paragraphe (1) est recouvrable par celle-ci auprès du véritable employeur. (3) Where a person who is deemed under these Regulations to be an employer of an insured person fails to pay, deduct or remit the premiums that an employer is required to pay, deduct or remit under the Act or these Regulations, the provisions of Parts IV and VI of the Act shall apply to the person as if the person were the actual employer. (3) Lorsque la personne qui est réputée être l'employeur d'un assuré en vertu du présent Régulation ne paie pas, ne retient pas ou ne verse pas les cotisations qu'un employeur est tenu de payer, de retenir ou de verser aux termes de la Loi ou du présent Régulation, les dispositions des parties IV et VI de la Loi s'appliquent à elle comme s'il s'agissait du véritable employeur. [Emphasis added.] Decision appealed [15] The Commission raised before the Tax Court of Canada the argument to the effect that it did not "pay" the amounts that it remitted to the employees since it did not owe them any legal obligation. According to the Commission, the word "paid" as it appears in the Regulations requires such an obligation. [16] Lamarre Proulx J. dismissed this argument. She referred to the decision by our Court in Insurance Corp. of British Columbiav. Canada(Minister of National Revenue), [2002] F.C.J. No. 380, 2002 FCA 104, docket A-658-00 [ICBC]. After citing several passages from that decision, Lamarre Proulx J. dismissed the Commission's appeal as follows: [34] I must conclude that the Appellant is not exempt from the deeming provisions of the Regulations. Subsection 1(2) of the Regulations clearly stipulates that "employer" includes a person who pays or has paid earnings of an insured person for services performed in insurable employment. Subsection 10(1) of the Regulations also clearly stipulates that where an insured person is paid by a person other than the insured person's actual employer, that other person shall, for the purposes of maintaining records, calculating the insurable earnings of the insured person and paying, deducting and remitting the premiums payable on those insurable earnings under the Act and these Regulations, be deemed to be the employer of the insured person in addition to the actual employer. Commission's submissions on appeal [17] The Commission raises essentially two grounds for appeal. First, it claims that subsection 1(2) of the Regulations is ultra vires [TRANSLATION] "since it has no bearing on the manner" the EIA is applied as required by paragraph 108(1)(d) (Appellant's memorandum, paragraph 29). [18] Second, the Commission reiterates the argument that it raised before the Tax Court of Canada, namely that paragraph 10(1)(a) of the Regulations cannot apply since the Commission did not "pay" or "remit" the amounts in question. For a salary to be "paid" or "remitted", there must be a legal obligation to pay and the Commission had no such obligation to the employees. Rather, it acted as [TRANSLATION] "an intermediary" by turning over to the employees [TRANSLATION] "the amounts collected in their name"(Appellant's memorandum, paragraph 64). [19] This second argument is based on the legal meaning of the word "paid". According to articles 1554 to 1671 of the Civil Code of Québec, the payment is a manner of extinguishing an obligation and presupposes the existence of an obligation: 1554 Every payment presupposes an obligation; what has been paid where there is no obligation may be recovered. 1554 Tout paiement suppose une obligation: ce qui a été payé sans qu'il existe une obligation est sujet à répétition. 1671 Obligations are extinguished not only by the causes of extinction contemplated in other provisions of this Code, such as payment, the expiry of an extinctive term, novation or prescription, but also by compensation, confusion, release, impossibility of performance or discharge of the debtor. 1671 Outre les autres causes d'extinction prévues ailleurs dans ce code, tels le paiement, l'arrivée d'un terme extinctif, la novation ou la prescription, l'obligation est éteinte par la compensation, par la confusion, par la remise, par l'impossibilité de l'exécuter ou, encore, par la libération du débiteur. [20] The Commission claims that it did not have any such obligation to the employees to whom the amounts were turned over. It adds, relying on sections 8.1 and 8.2 of the Interpretation Act, R.S.C. 1985, c. I-21, that the word "paid" must be interpreted in a manner that is consistent with Quebec civil law. [21] Even though the recourse that it brought in the context of its statutory mandate was in its own name, the Commission argues that it is acting as a agent on behalf of the employees (Château, Compagnie d'assurance v. C.C.Q, [1999] J.Q. 5601, C.A. 500-09-002887-966, J.E. 2000-193; Commission de la Construction du Québec v. Richer, [2004] J.Q. 586, No. 550-32-011624-035; Dupont v. Boutin, No. 500-05-013021-835). The Commission insists on the fact that the employees have no other recourse against the Commission if it does not succeed in recovering the salaries owed to them. Analysis and decision [22] The first ground of appeal can be disposed of quickly. The underlined portion of paragraph 108(1)(f) of the EIA, which is reproduced at paragraph 13 above, confers to the Governor in Council in no uncertain terms the power to adopt subsection 10(1) of the Regulations. [23] With respect to the second ground, the Commission acknowledges that in order for its appeal to succeed, it must establish that the payments it made are different from the payments that were at issue in ICBC. In that case, it was a matter of determining whether an insurance company (the ICBC) was subject to the Regulations with respect to amounts that it paid to a home-care attendant for the benefit of its insured. According to the facts in evidence, it was the insured who employed the home-care attendant, but it was the ICBC that paid her salary in the context of the insurance coverage offered to the insured. [24] The Tax Court of Canada had first determined that the salary had not been "paid" by the ICBC within the meaning of the Regulations since the ICBC did not have the obligation to pay that salary. The Federal Court of Appeal, per Strayer J.A. determined that this interpretation failed to take account of the legislative context: [5] I am of the view that the learned Trial Judge gave an unnecessarily narrow construction to the word "paid" in section 10 of the Regulations. As a result he wrongly concluded that when ICBC transferred to Harvey the amount of salary as agreed upon by Lake and Harvey, it was not "paying" an insured person as defined in the Employment Insurance Act. In reaching this conclusion he relied on textbook and dictionary definitions of the verb "to pay", as well as a decision of this Court in A.G.C. v. Théorêt ((1988), 61 D.L.R. (4th) 289). He interpreted the word to mean that one only "pays" when one has a legal obligation owed specifically to the payee. [25] The Court added later on: [8] The purpose of the Regulations and the statute which authorizes them is in part to facilitate collection of employment insurance premiums, an activity which is essential to the scheme as it now exists. The Act clearly authorizes the kind of provision which has been adopted by the Governor in Council in section 10 of the Regulations. In examining section 10 one sees that it is to apply inter alia where an employed insured person is being "paid by a person other than [his or her] actual employer". In such case that "other person" must maintain records of employment and calculate, deduct, and remit the appropriate premiums. The proposition is simple enough and its purpose clear: premiums are to be deducted at the source where salary or wages are calculated and administered, and where checks or pay-packets are issued. The term "paid" ought to be interpreted in context, and it is not necessary to examine technical sources in order to attribute to it a meaning that would defeat the clear purpose of the section. [26] Before concluding, the Court addressed the Minister's other argument to the effect that the ICBC, as the insurer, had the obligation to pay the home-care attendant in any event and that the salary had therefore been paid in the legal sense of the term. Strayer J.A. recognized the fact that the ICBC was engaged to make the payments as an insurer, but he determined that this factor was of no importance: [10] . . . While I agree with the Applicant that the Respondent was engaged in meeting a legal obligation to its insured by making payments for the insured's benefit, I do not think it is necessary to rely on this fact. Consistently with what I have said earlier, I do not believe the word "paid" has to be limited to situations when there is a legal obligation to transmit wages or salary to the employee of another. [27] The Commission tried to persuade us that its situation is different than that of the ICBC. It insisted on the fact that the amounts that the ICBC paid to the home-care attendant had the effect of releasing the insured, as employer, of its obligation to pay the salary while in this case, the employer was released from that obligation by paying the Commission. The Commission then only turned over to the employees the amounts collected on their behalf (Appellant's memorandum, paragraph 57). [28] I do not see how this distinction can be useful for the Commission. First, if it is acting as an agent for the employees as it insists it does (Appellant's memorandum, paragraph 63), the amounts that it receives from the employers are collected for and on behalf of the employees in such a way that they maintain their juridical nature until the time that they are turned over to the employees. [29] Second, it was as an insurer and not as an employer that the ICBC was paying the amount to the home-care attendant. As a matter of law, it was the insurance proceeds that were paid as such. It is in that context that Strayer J.A. felt the need to specify that the word "paid" must not be limited to situations where there is a legal obligation to transmit a salary as such (See the passage cited at paragraph 26 above). According to that decision, the Regulations apply to any amount that operates as salary whether or not it is salary in the strictly legal sense. [30] The amounts paid by the Commission fall into this scope of application of the Regulations, as do those that were paid by the ICBC. The only difference is that the ICBC took the amounts necessary to make those payments directly from the insurance fund, while the Commission has to recover them from recalcitrant employers. That distinction, if it should have any bearing, is such that the application of the Regulations is that much more appropriate in the case of the Commission. [31] Even though it is not necessary to further pursue the analysis of the interpretation of the word "paid", I think it worthwhile to add that the Commission cannot claim that it does not have [TRANSLATION] "any obligation" to the employees (Appellant's memorandum, paragraph 55). If it is true that the Commission only recovers on behalf of employees the amounts due to them, it must recognize that once those amounts are recovered, it has the obligation to turn these amounts over to the employees on whose behalf they were collected. Further, there is no doubt that by remitting those amounts to the employees, the Commission is released from that obligation. Indeed, those amounts are not subject to claims for overpayment by the Commission. Therefore, the Commission's remittances over the years satisfy the requirements underlying a payment under articles 1554 and 1671 of the Civil Code of Quebec (see paragraph 19 above). [32] In the absence of inconsistency with the Quebeclegal system, sections 8.1 and 8.2 of the Interpretation Act need not be addressed. [33] For these reasons I would dismiss the appeal with costs. "Marc Noël" J.A. "I concur. Gilles Létourneau J.A." "I concur." M. Nadon J.A." Certified true translation Kelley A. Harvey, BCL, LLB FEDERAL COURT OF APPEAL SOLICITORS OF RECORD DOCKET: A-9-05 STYLE OF CAUSE: COMMISSION DE LA CONSTRUCTION DU QUÉBEC v. MINISTER OF NATIONAL REVENUE PLACE OF HEARING: Québec, Quebec DATE OF HEARING: January 24, 2006 REASONS FOR JUDGMENT: Noël J.A. CONCURRED IN BY: Létourneau J.A. Nadon J.A. DATE OF REASONS: February 8, 2006 APPEARANCES: André Lareau FOR THE APPELLANT Natalie Goulard FOR THE RESPONDENT SOLICITORS OF RECORD: Joli-Coeur, Lacasse, Geoffrion, Jetté, Saint-Pierre Sillery, Quebec FOR THE APPELLANT John H. Sims, Q.C. Attorney General of Canada Ottawa, Ontario FOR THE RESPONDENT