Le Chat Rayé Inc. c. M.R.N.

Le Chat Rayé Inc. c. M.R.N. Court (s) Database Tax Court of Canada Judgments Date 2004-04-20 Neutral citation 2004 TCC 309 File numbers 2003-1914(EI) Judges and Taxing Officers Louise Lamarre Proulx Subjects Employment Insurance Act Decision Content Docket: 2003-1914(EI) BETWEEN: LE CHAT RAYÉ INC., Appellant, and THE MINISTER OF NATIONAL REVENUE, Respondent. [OFFICIAL ENGLISH TRANSLATION] ____________________________________________________________ Appeal heard January 19, 2004, at Montréal, Quebec Before: The Honourable Justice Louise Lamarre Proulx Appearances: Agent for the Appellant: Alain Savoie Counsel for the Respondent: Julie David ____________________________________________________________________ JUDGMENT The appeal under subsection 103(1) of the Employment Insurance Act is allowed and the decision of the Minister of National Revenue is set aside, in accordance with the attached Reasons for Judgement. Signed at Ottawa, Canada, this 20th day of April 2004. "Louise Lamarre Proulx" Lamarre Proulx, J. Translation certified true on this 8th day of November 2004. Sharon Winkler Moren, Translator Citation: 2004TCC309 Date: 20040420 Docket: 2003-1914(EI) BETWEEN: LE CHAT RAYÉ INC., Appellant, and THE MINISTER OF NATIONAL REVENUE, Respondent. [OFFICIAL ENGLISH TRANSLATION] REASONS FOR JUDGMENT Lamarre Proulx J. [1] This is an appeal from a decision of the Minister of National Revenue (the "Minister") that for the period from August 26, 2001 to August 27, 2002, Benjamin Beauregard performed insurable work for the Appellant as defined by the Employment Insurance Act (the "Act"). [2] The Minister relied on the facts described at paragraph 6 of the Reply to the Notice of Appeal (the "Reply"), which read: [TRANSLATION] (a) The Appellant operated a visual design business. (b) The Appellant offered its clients a turnkey service, from the visual design to the delivery of the set. (c) The Appellant obtained contracts and hired, from a personal repertoire, the workers required to carry out the contracts obtained. (d) Jean Petit was the Appellant's only shareholder. (e) During the period at issue, the Appellant hired the Worker to transport, assemble and remove sets. (f) The Appellant communicated to the Worker the address of the workshop where he was to go and the Worker followed the Appellant's directions in the following order: - He went to the rental firm chosen by the Appellant to pick up the truck. - He went to the place where the set was located. - He loaded the set into the truck with the help of Mr. Jean Petit or another of the Appellant's workers. - He delivered the set to the place indicated by the Appellant. - He emptied the truck of its contents. - He set up the set if requested by the Appellant. - He returned the truck to the rental company. (g) The Worker was paid by the hour, $15 at the beginning and $18 at the end of the period, according to hours actually worked at the end of each contract or mandate. (h) During the period at issue, the Worker accumulated 260 insurable hours and insurable earnings totalling $4,093 from the Appellant. [3] At the beginning of the hearing, the Appellant's Agent informed the Court that paragraphs 6(a), 6(b), 6(d), 6(e) and 6(g) were admitted, that paragraphs 6(c) and 6(f) were denied as written. [4] Jean Petit, the Appellant's president, testified. Regarding the statement at paragraph 6(d) of the Reply, he specified that he held all voting shares in the company but that his two sons also held shares, but not voting shares. [5] Mr. Petit explained that the Appellant has been an artistic director since 1995, the year in which Mr. Petit lost his job as a set designer with Télé-Québec. The Appellant offers set design services. The Appellant can have it built and set up. Set removal is also part of its services. [6] The company has no permanent employees. Mr. Petit says that this is a world of freelancers. Based on contract needs for a set, Mr. Petit forms teams. This is rather seasonal work, with the summer, autumn and January being the busiest times. [7] The company's main clients are Videotron and Canal Vox. The company also has a few small production companies. [8] Generally, Mr. Petit does the design and supervision of the various steps that lead to installation of a set. [9] He filed as Exhibit A-1 an invoice from the Appellant to Canal Vox for the production "Les Fêtes Enchantées". In it are costs related to the purchase of set materials, the services of individuals assisting, doing research, construction and labour for installation. [10] Mr. Petit explained that to obtain a contract it is first necessary to do a drawing or model and set out a budget. When the contract is awarded, it is important to ensure that people are available. It is necessary to purchase the set materials or to request a studio to prepare some components of the set. When these components are finished, they must be picked up, transported and assembled on site. [11] On the whole, these are short-term contracts. [12] The Worker in question in the case at bar, Benjamin Beauregard, worked in transportation, installation and occasionally removal. The truck was rented by the Appellant. Mr. Beauregard drove the truck. He was normally accompanied by an assistant. The installer had to find an assistant. He gave the name to Mr. Petit who could reject it if he was not satisfied with the assistant's services in other circumstances. The Appellant paid the assistant. [13] Benjamin Beauregard's father was a set builder. His job was eliminated at the same time as Mr. Petit's. He had three sons. At the beginning, they all worked for the Appellant. In the long term, Benjamin became the most available. [14] Mr. Petit's son, Guillaume Petit, also worked as a set builder. If he worked with Mr. Beauregard, Guillaume had precedence, although he did not drive the truck. [15] Exhibit A-2 is an invoice from an individual who built some set components in his workshop. This individual was paid at an hourly rate. [16] Exhibits A-3 to A-7 are invoices from installers other than Mr. Beauregard. They were produced to demonstrate that this is how business is done in this kind of enterprise, by service contracts paid at hourly rates or by fee. Exhibit A-7 was also filed to show that, occasionally, Mr. Petit does not know the assistant. [17] Normally, the regular installers or assistants are requested first. But when they are not available, others are reserved and hired. The contracts are verbal and short term. Payment is made the last day of the contract, by cheque. [18] Mr. Petit informed the assembler of the hours in which the various pick-up jobs of sets and installation were to be done. He could suggest what route to take. [19] Mr. Petit was often present during the installation, especially when there was no installation plan for the set. Once the set was installed, he came by to check whether everything was correct. [20] The installer had his own cell phone as well as his own tools for assembly, including a drill. [21] Installers paid for tickets they received during transport. [22] The installers have no office on the business's premises. They are communicated with by telephone. None of them worked exclusively for the Appellant. [23] For the period at issue, the Worker obtained $4,000 in a few months in which he worked nearly seven days per week. Before, it was amounts of approximately $1,000 per year. [24] In August 2002, Benjamin asked him to change his status from self-employed worker to employee. He wished to return to his studies. He was also working for another installation company and when he worked for this company he had employee status. This enabled him to accumulate the necessary hours for entitlement to employment insurance benefits. [25] Objections Officer Robert Leprohon testified. His testimony did not introduce any facts different from those of Mr. Petit. His report was filed as Exhibit I-1. Exhibit I-2 is the total of invoices from the Worker for the work performed. [26] The Worker did not come to testify although he had been summoned by the Respondent. [27] The Appellant's agent referred to a decision that I rendered in Skylink Aviation Inc. v. Canada (Minister of National Revenue), [2001] T.C.J. No 223 (Q.L.) and a Federal Court of Appeal decision in Vulcain Alarme Inc. v. Canada (Minister of National Revenue), [1999] F.C.J. No 749 (Q.L.). From the latter, he quoted paragraph 18 in particular: 18 With respect, we do not feel that these facts are conclusive as to the analysis of risk of loss or expectation of profit by Mr. Blouin and his company. Although Mr. Blouin's income was calculated on an hourly basis, the number of hours of work were determined by the number of service sheets he received from the plaintiff. Mr. Blouin and his company thus had no guaranteed income. Unlike the technicians working as employees within the plaintiff's business, whose weekly salary was constant, Mr. Blouin's income fluctuated with the service calls. In fact, towards the end of his contract with the plaintiff Mr. Blouin was no longer doing the equivalent of forty hours a month as he was receiving few service sheets. [28] Counsel for the Respondent pointed out that control does not have to be exercised. What is important in the employer-employee relationship is the power to control. [29] I refer to the Federal Court of Appeal decision in D & J Driveway Inc. v. Canada, [2003] F.C.J. No. 1784 (Q.L.). This relates to delivery truck drivers. I refer to paragraphs 7, 9 and 15 of this decision: 7 The drivers have no facilities at the applicant's premises. Their services are retained and provided on call. They are entirely free to refuse the offer made to them to drive a truck, for example, to Halifax, Québec or Montréal. Deliveries are made from Saint-Jacques in New Brunswick. The drivers receive a fixed amount which is determined in accordance with the distance to be travelled. . . . 9 A contract of employment requires the existence of a relationship of subordination between the payer and the employees. The concept of control is the key test used in measuring the extent of the relationship. However, as our brother Décary J.A. said in Charbonneau v. Canada (Minister of National Revenue - M.N.R.), [1996] F.C.J. No. 1337, [1996] 207 N.R. 299, followed in Jaillet v. Canada (Minister of National Revenue - M.N.R.), 2002 FCA 394, control of the result and control of the worker should not be confused. At paragraph 10 of the decision, he wrote: 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. . . . 15 We feel it is legally incorrect to conclude that a relationship of subordination existed, and that there was consequently a contract of employment, when the relationship between the parties involved sporadic calls for the services of persons who were not in any way bound to provide them and could refuse them as they saw fit. Concluding that a contract of employment existed in such circumstances is also not without serious and burdensome practical consequences for a payer, especially as more often than not such a conclusion and the resulting assessment for fringe benefits, such as income tax, employment insurance and pension plan, which the payer must pay are retroactive in nature. The payer becomes liable not only for his share but, with a right of recovery, for what the employee has not paid. [30] In work circumstances in which the distinction between contract of employment and contract for services is difficult to determine, according to the recent principles laid down by the Federal Court of Appeal, attention must be directed to the common intent of the parties, as in all contracts. Here, the common intent was a contract for services. At the end of the period at issue, the Worker asked the Appellant for employee status, which the Appellant refused. [31] The Appellant's choice to continue with a contract for services rather than a contract of employment was made in consideration of the economic and operational requirements of his operation. This is not a contract of employment masquerading as a contract for services. Like the delivery truck drivers in D & J Driveway Inc. (supra), the worker had no facilities at the Appellant's premises. These were sporadic contractual relationships. There was control of the outcome and not a relationship of subordination. The worker was free to refuse any request to work. He provided his own tools. [33] The appeal is allowed. Signed at Ottawa, this 20th day of April 2004. "Louise Lamarre Proulx" Lamarre Proulx J. Translation certified true on this 8th day of November 2004. Sharon Winkler Moren, Translator