Cosmteck Inc. v. M.N.R.

Cosmteck Inc. v. M.N.R. Court (s) Database Tax Court of Canada Judgments Date 2005-05-05 Neutral citation 2005 TCC 279 File numbers 2004-3535(EI) Judges and Taxing Officers Sylvio J. Savoie Subjects Employment Insurance Act Decision Content Docket: 2004-3535(EI) BETWEEN: COSMTECK INC., Appellant, and THE MINISTER OF NATIONAL REVENUE, Respondent. [OFFICIAL ENGLISH TRANSLATION] ____________________________________________________________________ Appeal heard on March 9, 2005, at Montréal, Quebec Before: The Honourable S.J. Savoie, Deputy Judge Appearances: Agent for the Appellant: Patricia Grassellini Counsel for the Respondent: Emmanuelle Faulkner ____________________________________________________________________ JUDGMENT The appeal is dismissed and the decision of the Minister is confirmed, in accordance with the attached Reasons for Judgment. Signed at Grand-Barachois, New Brunswick, this 5th day of May, 2005. "S.J. Savoie" Savoie, D.J. Translation certified true on this 30th day of March, 2006 Garth McLeod, Translator Citation: 2005TCC279 Date: 20050505 Docket: 2004-3535(EI) BETWEEN: COSMTECK INC., Appellant, and THE MINISTER OF NATIONAL REVENUE, Respondent. [OFFICIAL ENGLISH TRANSLATION] REASONS FOR JUDGMENT Savoie, D.J. [1] This appeal was heard at Montréal, Quebec on March 9, 2005. [2] The appeal concerns the insurability of the employment of Pauline Lacroix, the worker, while in the service of the Appellant from February 17 to April 7, 2003. [3] In a letter dated June 14, 2004, the Minister of National Revenue (the "Minister") informed the Appellant of his decision according to which the worker held insurable employment. [4] The Minister based his decision on the following assumptions of fact: [translation] (a) the Appellant operates a business selling cosmetic and beauty products; (admitted with clarifications) (b) Patricia Grassellini was the sole shareholder of the Appellant; (admitted) (c) the Appellant operates its business in Montreal and Laval and its primary customers are beauty parlours; (admitted with clarifications) (d) during the period at issue, the Appellant hired 3 people: Ms. Grassellini and 2 representatives, including the worker; (admitted) (e) the worker began working for the Appellant on February 17, 2003 under a written contract of employment; (admitted) (f) the contract of employment stipulated, among other things, that -the representative would work under the instructions of the sales manager and would submit a weekly report on her work, her calls, her interviews and information on the value of the orders taken during the week, -the representative agreed, as an integral part of her work, to attend all meetings of sales personnel, product presentations, conventions and other gatherings as directed by her immediate supervisor or other members of the management of the company, -the representative agreed to sell the merchandise and equipment distributed by the company exclusively at the list prices established by the company or at a special price established and approved by the company; (admitted with clarifications) (g) the work of the worker consisted of: meeting customers in order to present the products to them and leave samples with them, take orders and deliver them to the office of the Appellant and deliver products when dealing with new customers; (admitted with clarifications) (h) the worker did not have to adhere to a specific work schedule, but worked 40 hours a week; (admitted with clarifications) (i) the worker prepared and gave to the Appellant a list of the customers that she visited and the orders that she wrote; (admitted) (j) the worker was required to call on the customers designated by the Appellant and attend training courses when required to do so by the Appellant; (denied) (k) the Appellant supplied the worker with samples of products, business cards, order forms and other supplies, while the worker provided her own vehicle and absorbed the operating costs; (admitted) (l) the worker was to be remunerated on a commission basis, but, for the last 4 weeks of the period, she received $1,538.46 every 2 weeks, which the Appellant called "advances on commissions" whereas the contract stipulated that the representative was not entitled to advances on commission; (admitted with clarifications) (m) the customers were customers of the Appellant and not of the worker; (denied) (n) the duties of the worker formed part of the regular activities of the Appellant; (unknown) (o) during the period at issue, the worker worked for 280 hours, i.e., 7 x 40-hour weeks; (unknown) (p) during the period at issue, she received a total of $5,300.41 from the Appellant. (unknown) [5] The evidence revealed that the Appellant operates its business in Montrealand region and its main customers are beauty shops. Patricia Grassellini, the sole shareholder of the Appellant, testified at the hearing. She stated that she had used a standard contract to set out in writing the agreement between herself and the worker. She added that the worker was not required to take orders and deliver them. According to her, this was a marketing practice, the aim of which was to establish contact between the representative and the customer. She stated, furthermore, that she had set the maximum number of hours that the worker was required to work at 40, by reason of her age. She wanted to clarify, in response to the assumption set out at paragraph (1), that the worker had received these advances at her request, as she was dealing with personal problems. She stated in her testimony that the worker had told her that she had her own customers to whom she could sell. Having denied the assumption of the Minister to the effect that the customers were customers of the Appellant and not of the worker, Patricia Grassellini nonetheless stated in her testimony that she had not given a list of customers to the worker, but that she had given her her existing customers and also that she had recommended customers to her. She maintained that the worker had no office or place of work. She added that the worker had chosen her own territory and that she knew that she would receive no remuneration if she did not work. [6] The worker had her own pager and used her own car for her job. The Appellant provided the worker with her business cards, samples, advertising materials and the product catalogue. According to the Appellant, the worker incurred the risk of loss since she would earn no money if she did not sell product. [7] Ms. Grassellini stated that the worker had announced one morning that she was leaving her job, without giving any reasons. Ms. Grassellini added that the following year, towards the end of February 2004, the worker came back and she hired her on a full-time basis. She stated that the worker remained on the job for one month, but she had had to dismiss her as she was not capable of working. According to her account, the worker was taking a great deal of medication. [8] During her testimony, Ms. Grassellini produced a letter (Exhibit A-1), dated March 16, 2004, signed by the worker. The letter was addressed to the CPP/EI Eligibility Officer. The contents of this letter contradict several of the statements by the worker to the Appeals Officer. [9] The investigation conducted by the coverage investigators and the Appeals Officer revealed that the worker was a sales representative. She met with customers, gave them product samples and took their orders, which she took back to the office of the Appellant. She then delivered the products in question. The price lists were set by the Appellant and the worker worked on the road and brought the money back to the office. The worker reported that the Appellant called her every day on her pager to obtain a report of her activities. The worker was not allowed to have someone replace her. The job of the worker was to sign up beauticians for training sessions on the products that were given at the office of the Appellant. She also had to give the Appellant lists of the customers she had visited and the order forms. The worker was supervised. The Appellant told her which customers to visit. The worker had to report to the office of the Appellant every Monday to attend training sessions and other meetings. Her work was planned by the Appellant. The worker stated that she had been dismissed by the Appellant because she wanted to be considered as an employee. The billing of clients was done by the Appellant. The Appellant stated that the worker had no set hours of work and that her comings and goings and her hours of work were not controlled. [10] A reading of the contract between the Appellant and the worker, dated January 30, 2003 (Exhibit I-1), revealed the following facts: the duties of the representative (i.e., the worker) were to work under the instructions of the Sales Manager and to give the Sales Manager a weekly report on her work, her visits, her interviews and other information. Under the terms of this contract, the worker undertook to attend all meetings of the sales staff, product presentations, conventions and other gatherings. She also undertook to sell the merchandise distributed by the Appellant only at the list prices set by the Appellant. She could not grant discounts or price reductions without the specific, written consent and authorization of the Appellant. Furthermore, the worker undertook to perform any other tasks related to her duties or capacities, as required by her immediate supervisor. She also undertook to comply with all orders, instructions, policies and rules established orally or in writing by the Appellant. The agreement stipulated that the worker, as a representative, could take vacations during periods when business was slow for the Appellant. The contract between the Appellant and the worker stipulated that the worker agreed to devote 100% of her time, her energy, effort and dynamism to the exclusive service of the Appellant. The contract stipulated that payments would be made to the worker every two weeks in the amount of $1,538.46 as "advances on commissions". [11] The Minister, in setting out his decision, based himself on paragraph 5(1)(a) of the Employment Insurance Act (the "Act"), which reads as follows: INSURABLE EMPLOYMENT 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; [...] [12] The case law has established a series of criteria to determine whether a contract is a contract of service or a contract for services. Although there are other criteria, the following four are the ones most commonly used: (a) the degree or absence of control exerted by the alleged employee; (b) ownership of the tools; (c) the chance of profit and the risk of loss; (d) the extent to which the work performed by the alleged employee is integrated into the business of the alleged employer. [13] Wiebe Door Services Ltd. v. Canada (Minister of National Revenue - M.N.R.), [1986] 3 F.C. 553 and 671122 Ontario Ltd. v. Sagaz Industries Canada Inc., [2001] 2 S.C.R. 983, have been cited frequently in the past, as they have been most useful to courts charged with establishing whether employment, as in the case at bar, was insurable because it met the requirements of a contract of service or whether it was not insurable because it instead met the definition of a contract for services. [14] Let us examine the facts in the instant case in light of each of these criteria. A. THE DEGREE OR ABSENCE OF CONTROL EXERTED BY THE ALLEGED EMPLOYER [15] It has been established that the worker was required to report to the Appellant every week. This obligation on the part of the worker was set out in the contract. The worker, furthermore, could not alter the price list without the authorization of the Appellant. She was also required to attend training sessions and other meetings organized by the Appellant. The worker also had to prepare reports on her interviews and provide the Appellant with information on the value of the orders that she had taken during the week. The work contract committed the worker to devoting her entire time to the Appellant, to making every effort needed to carry out satisfactorily the duties that were assigned to her and complying with all the orders, instructions, policies and rules set out orally or in writing by the Appellant. The evidence is accordingly convincing that the Appellant exerted control over the worker and her work. B. OWNERSHIP OF TOOLS [16] It has been established that the Appellant provided the worker with catalogues, samples and business cards. Furthermore, the office of the Appellant was supplied for training sessions or other meetings which the worker was required to attend. For her part, the worker provided her own vehicle and her own cellular telephone. When viewed from the standpoint of this criterion, the scales also tilt to the side of insurable employment. C. THE CHANCE OF PROFIT AND THE RISK OF LOSS [17] It has been established that the worker had no risk of loss or chance of profit. She was paid on the basis of a salary/commission set by the Appellant at $1,538.46, payable every two weeks. Under this criterion also, the Appellant maintained that the worker incurred the risk of loss, since if she did not work, she did not receive any money. It must be noted, however, that the fact that one will not be paid if one does not work is not a description that fits an independent entrepreneur. The facts in the instant case, when analyzed on the basis of this criterion, still support the existence of a contract of service. D. THE EXTENT TO WHICH THE WORK PERFORMED BY THE ALLEGED EMPLOYEE IS INTEGRATED INTO THE BUSINESS OF THE ALLEGED EMPLOYER [16] It has been established that the duties of the worker were well integrated into the activities of the Appellant. The customers were customers of the Appellant. It should be remembered that the case law recommends that the Court determine the nature of employment examined under this criterion by answering the following questions: "To whom does the business belong for which the worker offers their services?" In other words, do the services rendered by the worker, in the instant case, serve the aims and objectives of the business of the Appellant or is the worker operating her own business? When viewed from the standpoint of this criterion, it is quite clear to me that the work performed by the worker was an integral part of the business of the Appellant. Without her representatives, including the worker, the Appellant would not have been able to do business. [17]In summary, therefore, the facts in the instant case, when examined in light of the criteria set out above, support the conclusion that the worker held insurable employment. [18]The Appellant was unaware of the assumed facts set out by the Minister in paragraphs (n), (o) and (p) of the Reply to the Notice of Appeal. In this regard, we should bear in mind the rule established in Elia v. Canada(Minister of National Revenue - M.N.R.), [1998] F.C.J. No. 316, where Pratte J. states the following: Contrary to what the judge believed, he therefore could have intervened and should have intervened if, as he asserted, the evidence established that the Minister's decision was unreasonable. However, it seems to us that the judge's assertion is also inaccurate and based on an error of law, since the judge did not take into account the well-settled rule that the allegations in the Reply to the Notice of Appeal, in which the Minister states the facts on which he based his decision, must be assumed to be true as long as the Appellant has not proved them false. [19]The Appellant had the burden of proving that the Minister's assumptions of fact were false. It also had the burden of proving that the decision of the Minister was not well founded and that the intervention of this Court was justified. The Appellant did not discharge this burden. Furthermore, this Court has noted a number of contradictions between the information provided by the worker and that provided by the Appellant to the Appeals Officer. Moreover, the contract signed between the parties clearly contradicts the position of the Appellant that states, among other things, that the control over the worker and her work was non-existent. [20]At the hearing, the Appellant produced the letter from the worker dated March 16, 2004, to the CPP/EI Eligibility Officer (Exhibit A-1). The contents of this letter contradict a number of statements taken from the worker by the Appeals Officer. How must this Court interpret this letter? It would perhaps be necessary to examine the contents of this letter in its context. The following are the circumstances in which this letter was written. The worker was dismissed in 2003 because the Appellant did not want to treat her as a regular employee and the worker subsequently provided to the investigators information about her employment that established that she held insurable employment. The following year, the worker was re-hired by the Appellant as a full-time employee, something she had always refused to do. During this period, which lasted approximately one month, in which the worker was employed by the Appellant as a regular employee, she wrote the letter in question. Shortly thereafter, the worker was laid off. Was this pure chance? Because of the specific circumstances which led to the writing of this letter, I believe I am justified in doubting its sincerity and thus its scope. [21]Furthermore, the Minister based his decision with respect to establishing the insurable earnings and insurable hours of the worker on section 10 of the Employment Insurance Regulations, and section 2 of the Insurable Earnings and Collection of Premiums Regulations. I reproduce below the sections in question: 10. (1) Where a person's earnings are not paid on an hourly basis but the employer provides evidence of the number of hours that the person actually worked in the period of employment and for which the person was remunerated, the person is deemed to have worked that number of hours in insurable employment. (2) Except where subsection (1) and section 9.1 apply, if the employer cannot establish with certainty the actual number of hours of work performed by a worker or by a group of workers and for which they were remunerated, the employer and the worker or group of workers may, subject to subsection (3) and as is reasonable in the circumstances, agree on the number of hours of work that would normally be required to gain the earnings referred to in subsection (1), and, where they do so, each worker is deemed to have worked that number of hours in insurable employment. (3) Where the number of hours agreed to by the employer and the worker or group of workers under subsection (2) is not reasonable or no agreement can be reached, each worker is deemed to have worked the number of hours in insurable employment established by the Minister of National Revenue, based on an examination of the terms and conditions of the employment and a comparison with the number of hours normally worked by workers performing similar tasks or functions in similar occupations and industries. (4) Except where subsection (1) and section 9.1 apply, where a person's actual hours of insurable employment in the period of employment are not known or ascertainable by the employer, the person, subject to subsection (5), is deemed to have worked, during the period of employment, the number of hours in insurable employment obtained by dividing the total earnings for the period of employment by the minimum wage applicable, on January 1 of the year in which the earnings were payable, in the province where the work was performed. (5) In the absence of evidence indicating that overtime or excess hours were worked, the maximum number of hours of insurable employment which a person is deemed to have worked where the number of hours is calculated in accordance with subsection (4) is 7 hours per day up to an overall maximum of 35 hours per week. Earnings from insurable employment 2.(1) For the purposes of the definition "insurable earnings" in subsection 2(1) of the Act and for the purposes of these Regulations, the total amount of earnings that an insured person has from insurable employment is: (a) the total of all amounts, whether wholly or partly pecuniary, received or enjoyed by the insured person that are paid to the person by the person's employer in respect of that employment, and (b) the amount of any gratuities that the insured person is required to declare to the person's employer under provincial legislation. (2) For the purposes of this Part, the total amount of earnings that an insured person has from insurable employment includes the portion of any amount of such earnings that remains unpaid because of the employer's bankruptcy, receivership, impending receivership or non-payment of remuneration for which the person has filed a complaint with the federal or provincial labour authorities, except for any unpaid amount that is in respect of overtime or that would have been paid by reason of termination of the employment. (3) For the purposes of subsection (1) and (2), "earnings" does not include: (a) any non-cash benefit, other than the value of either or both of any board or lodging enjoyed by a person in a pay period in respect of their employment if cash remuneration is paid to the person by their employer in respect of the pay period; (a.1) any amount excluded as income under paragraph 6(1)(a) or (b) or subsection 6(6) or (16) of the Income Tax Act; (b) a retiring allowance; (c) a supplement paid to a person by the person's employer to increase a wage loss indemnity payment made to the person by a party other than the employer under a wage loss indemnity plan; a supplement paid to a person by the person's employer to increase worker's compensation paid to the person by a provincial authority; (d) a supplement paid to a person by the person's employer to increase a wage loss indemnity payment made to the person by a party other than the employer under a wage loss indemnity program; (e) a supplemental unemployment benefit payment made under a supplemental unemployment benefit plan as described in subsection 37(2) of the Employment Insurance Regulations; and (f) a payment to a person by the person's employer to cover the waiting period referred to in section 13 of the Act, or to increase the pregnancy, parental or compassionate care benefits payable to the person under section 22, 23 or 23.1 of the Act if the payment meets the criteria set out in section 38 of the Employment Insurance Regulations. [22]It must be noted that the Minister's calculation was not disputed by the Appellant. [23]In conclusion, this Court must conclude that the Minister properly performed the task conferred upon him by Parliament and there are thus no grounds to intervene in his decision. [24]For all these reasons, this Court concludes that the worker was employed under a contract of service, within the meaning of paragraph 5(1)(a) of the Act and that, in consequence, she held insurable employment during the period at issue. This Court further concludes that the worker, during the period at issue, accumulated 280 hours of insurable employment and insurable earnings in the amount of $5,300.41. [25]The appeal is accordingly dismissed and the decision of the Minister is confirmed. Signed at Grand-Barachois, New Brunswick, this 5th day of May, 2005. "S.J. Savoie" Savoie, D.J. Translation certified true on this 30th day of March, 2006 Garth McLeod, Translator CITATION: 2005TCC279 DOCKET FILE NO.: 2004-3535(EI) STYLE OF CAUSE: Cosmteck Inc. and M.N.R. PLACE OF HEARING: Montréal, Quebec DATE OF HEARING: March 9, 2005 REASONS FOR JUDGMENT: The Honouable S.J. Savoie, Deputy Judge DATE OF JUDGMENT: May 5, 2005 APPEARANCES: Agent for the Appellant: Patricia Grassellini Counsel for the Respondent: Emmanuelle Faulkner SOLICITOR OF RECORD: For the Appellant: Name: Firm: For the Respondent: John H. Sims, Q.C. Deputy Attorney General of Canada Ottawa, Ontario