Desbiens c. M.R.N.

Desbiens c. M.R.N. Court (s) Database Tax Court of Canada Judgments Date 2004-08-18 Neutral citation 2004 TCC 557 File numbers 2003-4666(EI) Judges and Taxing Officers Alain Tardif Subjects Canada Pension Plan Decision Content Dockets: 2003-4666(EI) 2003-4667(EI) BETWEEN: RICHARD DESBIENS, Appellant, and THE MINISTER OF NATIONAL REVENUE, Respondent. [OFFICIAL ENGLISH TRANSLATION] _______________________________________________________________ Appeals heard on common evidence with the appeals of Jacky Desbiens (2003-4669(EI) and 2003-4670(EI)), on July 21, 2004, at Chicoutimi, Quebec. Before: The Honourable Judge Alain Tardif Appearances: Counsel for the Appellant: Pierre Parent Counsel for the Respondent: Nancy Dagenais _______________________________________________________________ JUDGMENT The appeals filed pursuant to subsection 103(1) of the Employment Insurance Act are dismissed, and the decision of the Minister of National Revenue is confirmed in accordance with the attached Reasons for Judgment. Signed at Ottawa, Canada, this 18th day of August 2004. "Alain Tardif" Tardif J. Translation certified true on this 8th day of March 2005. Colette Dupuis-Beaulne, Translator Dockets: 2003-4669(EI) 2003-4670(EI) BETWEEN: JACKY DESBIENS, Appellant, and THE MINISTER OF NATIONAL REVENUE, Respondent. [OFFICIAL ENGLISH TRANSLATION] _______________________________________________________________ Appeals heard on common evidence with the appeals of Richard Desbiens (2003-4666(EI) and (2003-4667(EI)), on July 20, 2004, at Chicoutimi, Quebec. Before: The Honourable Judge Alain Tardif Appearances: Counsel for the Appellant: Pierre Parent Counsel for the Respondent: Nancy Dagenais _______________________________________________________________ JUDGMENT The appeals filed pursuant to subsection 103(1) of the Employment Insurance Act are dismissed, and the decision of the Minister of National Revenue is confirmed in accordance with the attached Reasons for Judgment. Signed at Ottawa, Canada, this 18th day of August 2004. "Alain Tardif" Tardif J. Translation certified true on this 8th day of March 2005. Colette Dupuis-Beaulne, Translator Citation: 2004TCC557 Date: 20040818 Dockets: 2003-4666(EI) 2003-4667(EI) BETWEEN: RICHARD DESBIENS, Appellant, and THE MINISTER OF NATIONAL REVENUE, Respondent. AND BETWEEN: Dockets: 2003-4669(EI) 2003-4670(EI) JACKY DESBIENS, Appellant, and THE MINISTER OF NATIONAL REVENUE, Respondent. [OFFICIAL ENGLISH TRANSLATION] REASONS FOR JUDGMENT Tardif J. [1] This deals with four separate appeals by the Appellants; each Appellant has two dockets. Each appeal covers a number of periods. The appeals cover the following periods and Payors: Appellant and Docket Number Payor and Period at Issue Richard Desbiens (2003-4666(EI)) Jacky Desbiens (2003-4669(EI)) (cont'd) AmboisInc. July 19 to October 22, 1999, July 10 to November 10, 2000, and November 5 to November 23, 2001. Appellant and Docket Number Payor and Period at Issue Richard Desbiens (2003-4667(EI)) Jacky Desbiens (2003-4670(EI) Les entreprises forestières F.G. Inc. November 30 to December 18, 1998, May 31 to July 16, 1999, November 1 to 19, 1999, May 29 to July 7, 2000, November 13 to December 8, 2000, June 11 to September 21, 2001, October 29 to November 2, 2001, June 3 to September 13, 2002 and October 14 to December 20, 2002. [2] The parties agreed to argue their appeals by presenting the same evidence for the four dockets. [3] Because the assumptions of fact used in the determinations under appeal are approximately the same for the four dockets, counsel for the Appellants made some admissions based on the facts alleged in the docket of Jacky Desbiens (2003-4669(EI)), as follows: (a) the Payor operated a forest cutting business; (b) during the periods at issue, the Payor hired the Appellant to cut wood on the Payor's lands; (d) the Appellant and Richard Desbiens worked as a team; (e) the Appellant's tasks consisted of driving the skidder or cutting trees; (g) a signed contract did not exist between the Appellant and the Payor; (h) the Appellant's tasks consisted of cutting and transporting the wood; (i) the Payor did not impose a wood-cutting quota on the Appellant; (j) the Payor did not impose a work schedule on the Appellant; (k) the Payor remunerated the Appellant based on the quantity of wood cut and measured; (m) the Payor's payroll records for the period beginning July 19 and ended October 22, 1999, showed that the Appellant had been paid $812 for the first 8 weeks and $754 for the last 4 weeks. For the period beginning July 10 and ended November 10, 2000, the records showed that the Appellant received $754 per week, and for the period beginning November 5 and ended November 23, 2001, the Appellant received $780.16 per week; (o) the Appellant was paid by direct deposit; (p) the total amount of money paid to the Appellant was to correspond with the amount of wood cut by the Appellant and measured; (q) after the final measurement, the Payor issued a final payment to the Appellant; (s) the Appellant was responsible for the repair and maintenance of his skidder; (u) the Appellant was to insure the equipment appropriately at his own cost; (v) the Appellant and Richard Desbiens provided a pick-up truck and various tools; (w) the Appellant and Richard Desbiens incurred the fuel costs for the skidder and the pick-up truck; (x) the Appellant supplied his own chain saw; (y) the Appellant was responsible for the costs and maintenance of the chain saw; (z) on November 2, 1999, the Payor issued a Record of Employment to the Appellant, for the period beginning July 19, 1999, and ended October 22, 1999, showing 540 hours of insurable employment and total insurable earnings of $10,454.72; (aa) on November 23, 2000, the Payor issued a Record of Employment to the Appellant for the period beginning July 10, 2000, and ended November 10, 2000, showing 810 hours of insurable employment and total insurable earnings of $13,572.00; (bb) on December 5, 2001, the Payor issued a Record of Employment to the Appellant for the period beginning November 5, 2001, and ended November 23, 2001, showing 135 hours of insurable employment and total insurable earnings of $2,340.48; [4] The following paragraphs were denied: (c) for the last 12 years, the Appellant and his father, Richard Desbiens, have been co-owners of a "Timber Jack" skidder valued at $33,000; (f) the Appellant and Richard Desbiens did not allow anyone else to operate the machinery; (l) the Appellant received advances for so-called labour wages and so-called machinery wages; (n) the so-called machinery wages were equal to 80% of the so-called labour wages; (r) the Payor subtracted from amounts owing to the Appellant the so-called labour wages and so-called machinery wages paid to the Appellant, including employer and employee contributions; (t) when the skidder was inoperative, the Payor would not assign any other duties to the Appellant; (cc) the Appellant and Richard Desbiens operated their own business. [5] The Tax Court of Canada and the Federal Court of Appeal have rendered a number of judgments in cases involving similar facts. In most of these cases, the Courts concluded that a contract for services existed. [6] Counsel for the parties were very familiar with these rulings, and, therefore, they targeted the evidence they presented accordingly. [7] Counsel for the Appellants prepared very detailed files and was especially careful not to overlook anything so that the Appellants could discharge their burden of proof. Consequently, he called on everyone who could provide information about the Appellants' work to testify. [8] He insisted specifically on a number of elements and facts to demonstrate that the Appellants' cases were very different from most of those in which the Courts had ruled, and more specifically, the ruling of the Federal Court of Appeal in Tremblay v. Canada (Minister of National Revenue - M.N.R.), [2004] F.C.J. No. 802, (Q.L.). He pointed out some aspects of this case that, in his opinion, justified a conclusion in favour of the Appellants. [9] In addition to the Appellants, testimony was given by Mr. Armand Gagnon, Mr. Jeannot Simard, and Mr. Marc Gilbert. [10] Firstly, it was determined that the two Payors had more or less the same vocation. Ambois Inc. had three shareholders, namely, Mr. Armand Gagnon, Mr. Jeannot Simard, and Mr. Marc Gilbert. Mr. Armand Gagnon was the sole shareholder in Les entreprises forestières F.G. Inc. [11] This company, unlike Ambois Inc., owned equipment and machinery, namely, trucks, a power shovel, a delimber, a chain saw, a skidder, and a tractor. [12] The two companies owned a number of wood lots and had cutting rights on various lands. They worked within the scope of development plans on a regular basis. [13] Often, they worked in areas enclosed by boundaries, watercourses, lakes, etc. It was also indicated that numerous regulations were applicable, and varied from one area to another and from one site to another. [14] Mr. Armand Gagnon, the 73-year-old holder of all of the shares in Les entreprises forestières F.G. Inc. and of one third of the shares in Ambois Inc., is a forest enthusiast. [15] He worked in the forest at various jobs, particularly as a foreman, for all of his life; wood-cutting held no secrets for him. His co-shareholder, Mr. Gilbert, stated that he spent entire days in the forest and that he would probably keep doing so until the day came where he could no longer walk. [16] Mr. Gagnon was always present on one of his sites, particularly the one on which the Appellants performed their work. Because the Appellants were not the only workers to perform forestry work for one of the two companies, Mr. Gagnon could, at times, go to sites other than the ones on which the Appellants were working. [17] On occasion, Mr. Simard and Mr. Gilbert replaced him such that, in general, representatives of the Payors-Ambois Inc. and Les entreprises forestières F.G. Inc.-were present at the sites on which the Appellants were performing their work. [18] Based on this presence of a representative from one of the two Payors on the job sites, the Appellants maintained that their work had, at all times, been subject to ongoing, strict, and very significant control. To establish the existence of the power of control and the de facto control over the work performed, the Appellants were insistent about the following: · practically continuous presence of representatives of one of the two Payors who ensured that the work was done properly and in accordance with expectations in terms of quantity and quality and in compliance with all of the applicable regulations; · constant supervision to ensure that the cutting work was performed in the correct areas; · numerous marked areas and trees to ensure the protection of some trees and some sites, and to maintain a certain distance from watercourses, escarpments, wetlands, dangerous areas, and others; · on-site representatives' constant concern that the work be performed properly; · supervision carried out for the purpose of ensuring that the wood was placed properly to facilitate subsequent operations. [19] The Appellants were paid according to standard practices in this matter. Generally, they were paid weekly, based on an estimative assessment of the wood cut. [20] Eighty percent of the amount paid to the Appellants for their work was paid to them as leasing fees for the skidder that they owned jointly. This 80% as leasing fees covered all of the expenses incurred for the maintenance, operation, and repair of the skidder and other expenses, such as liability insurance premiums. [21] The lease agreement for the skidder was an oral agreement. Consequently, the rights and obligations of the lessees and the lessors were not set out in any written document. [22] Unlike in other logging operations, remuneration in this case was not linked to the potential selling price of the wood to be made into pulp or sent to a sawmill. The price was established further to an initial evaluation generally determined by one of the Payor's shareholders. The exact value of the work was confirmed by a duly qualified and certified scaler. The evaluation was based on an industry table in which the rates are based on the diameter of the base of the felled tree. [23] For these reasons, the Appellants' situation was unusual, because the remuneration payable to the Appellants for their work and for the skidder was not determined by the sale of the wood at the end of the process but, essentially, by the result of an on-site evaluation performed by the Payors' qualified scaler. [24] Because the Payors had extensive experience in forestry and because the parties agreed that the remuneration would be calculated on the basis of a recognized table in this field, there was very little difference between the estimated remuneration and the final remuneration to which they were entitled as determined by the official scaler's evaluation. [25] The table set out the rates by the diameter of the felled trees; the size of the trunk determined the price. The larger the diameter of the trunk, the higher the amount paid for that tree, regardless of height. [26] This method of determining the value of the services rendered by the Appellants and the skidder they owned jointly allowed the Payors to determine the price to pay quite accurately. The wood cut by the Appellants was later sold to third parties to be made into pulp or to be sawed. The prices paid had no impact on the amounts already paid to the Appellants. [27] The skidder, owned jointly by the Appellants, cost $24,000. During the periods at issue, the value of the skidder ranged from $15,000 to $20,000. [28] All of the operating expenses, such as oil, fuel, maintenance, and repair costs were the sole responsibility of the Appellants. The Payors did not assume any of the expenses inherent in the operation and repair of the skidder. [29] All of the parties acknowledged that the Payors would not have retained the services of the Appellants had they not owned the skidder. In other words, there would not have been a contractual relationship between the Payors and the Appellants had the Appellants not owned a skidder. The agreement between the Appellants and the Payors was identical to that of the three or four other teams that did the same work for the Payors, depending on the year, the periods, and the sites. [30] During all of the periods at issue, the Appellants worked exclusively for one of the two Payors, Ambois Inc. or Les enterprises forestières F.G. Inc. The Appellants have not, at any time, performed any similar work for other owners of woodlots or cutting rights, before, during, or after the periods at issue. In fact, the Appellants have performed this work in a continuous and repetitive manner, year after year, for more than 15 years-a period that exceeds the periods at issue. [31] The Payors considered the Appellants to be professionals and genuine experts in their field and they gave the Appellants priority when assigning work. [32] Each year, the Payors ensured that they assigned work to the Appellants. They did so continuously for a period of more than 15 years. When asked about the quality of the work and the productivity of other teams, it was stated that the services of incompetent, non-productive, or low-production workers were simply not retained. [33] On a number of occasions, the Payors' representatives stated that the way to do the work, the way to proceed, was "the standard," current practice. [34] The two Appellants were qualified to operate the machine; they decided between them who would drive it. No answer was given when asked whether the Payors could have assigned someone other than the Appellants to drive the skidder. Although no speculation should arise from this question, it is likely that the Appellants would not have agreed to let the Payors assign a third party to drive the skidder without giving the Appellants the right of supervision. [35] The Appellants pointed out some specific points, namely, that throughout the years, they had not worked for any company other than the Payors. In fact, they worked, year after year, for a large number of years, for the Payors, and they had some assurance that they would be able to continue doing so. In other words, a highly trusting relationship had developed between the Appellants and the Payors over the years. [36] Although the terms and conditions of the Appellants' remuneration was different from those found in some other cases involving the same type of economic activity, the Appellants were remunerated in accordance with their productivity, like the other Appellants in all other similar cases. This was a calculation based on a table known to the parties and whose rates varied in accordance with diameter of the base of the tree. [37] Unlike the situation found in most cases of this type, the Payors were present at the sites on which the work was performed. [38] The evidence also showed that, in some cases, trees could be cut in small areas located in specific sectors, near municipalities, watercourses, and neighbours watching to ensure that property rights and environmental aspects were being respected. This gave rise to the possibility of earning additional or compensatory sums to take these aspects into account. [39] Are all of the specific elements emphasized sufficient and decisive enough to conclude that the work performed by the Appellants during the periods at issue was performed in accordance with contracts of service? [40] Admittedly, the specific aspects of the Appellants' cases must be considered while keeping in mind the broad principles that have emerged from the numerous Federal Court of Appeal decisions in this matter. I refer namely to the following decisions and excerpts: · Charbonneau v. Canada(Minister of National Revenue - M.N.R.), [1996] F.C.J. No. 1337, (Q.L.), par. 4. 4 Moreover, while the determination of the legal nature of the contractual relationship will turn on the facts of each case, nonetheless in cases that are substantially the same on the facts the corresponding judgments should be substantially the same in law. As well, when this Court has already ruled as to the nature of a certain type of contract, there is no need thereafter to repeat the exercise in its entirety: unless there are genuinely significant differences in the facts, the Minister and the Tax Court of Canada should not disregard the solution adopted by this Court. · Jaillet v. Canada(Minister of National Revenue - M.N.R.), [2002] F.C.J. No. 1454, (Q.L.), par. 2: 2 [...] in Charbonneau v. M.N.R., [1996] F.C.J. No. 1337, to the effect that monitoring the result of the work done is not to be confused with the concept of controlling the worker. · Tremblay v. Canada(Minister of National Revenue - M.N.R.), [2004] F.C.J. No. 802, (Q.L.), paragraphs 20, 22, 27, 37, 39 and 40: 20 Most of the clauses in the rental contract, whether involving maintenance of equipment, loss of income resulting from non-use or delays, losses of or damage to equipment or the daily expenses of using and operating the equipment, indicate that it is the lessor, not the lessee, who remains in control of the equipment for the duration of the contract and who assumes all risks. Are these not actually the features of a contract of enterprise in which, for an agreed price, the contractor provides his work and the tools necessary to do the work at his own expense? 22 With respect, I believe that this written contract, referred to as a "rental" contract, and said to be accompanied by a verbal contract of employment, is in fact a contract of enterprise in which the owner of heavy machinery, in return for remuneration by volume, performs work requested and supplies his expertise and the equipment needed to do the work, with risks of loss and chance of profit, as appears in the written contract. Consequently, the work done by Denis Simard for the period covered by this contract, from May 10 to December 31, 1999, was not insurable employment under the Employment Insurance Act. 27 The judge apparently assessed integration from the standpoint of the payer's business. This is a mistake for, as this Court said in Le Livreur Plus Inc., supra, at paragraph 38, assessing integration "from the standpoint of the business nearly always leads unavoidably to the conclusion that the workers' activities were organized and programmed to suit the principal and overriding activity of the business. In other words, the workers' activities will always appear to be integrated into the business". Accordingly, the Court must assess the services the workers provide from their standpoint and consider whether the workers were acting on their own behalf. 37 In short, when the judge concluded at paragraph 210 of his decision that the payer "exercised adequate control over the workers", this must be understood to refer to adequate control over compliance with governmental standards and the quality and result of the work. Control of the quality and result of work is not the same thing as control of its performance by the worker responsible for doing it: see Vulcain Alarme Inc., supra, paragraph 10. [...] 39 Finally, on the concept of control I would add that the respondents were owners of their heavy machinery and were its only operators: see the testimony, for example, of B. Simard and D. Simard at pages 305, 316, 325 and 329 of the applicant's record, vol. I. The payer had no control over choosing the operator of the machinery owned by the respondents. At most it had a right of oversight or veto on the choice of a replacement if a respondent wished to be away. This right is understandable since the payer, who had given the Ministère an undertaking to comply with the conditions it laid down, was anxious to honour its commitments and receive the grants. It is also explained by the fact that for spraying the operator had to have special competence cards obtained after a course on herbicides: ibid., at pages 238 and 239. 40 In short, although it was stated that the heavy machinery was rented by the payer, the evidence was that it was the respondents who operated it exclusively and independently, without the sort of control that characterizes a contract of employment and produces the relationship of subordination necessary to the status of an employee. · Canada(Attorney General) v. Rousselle (F.C.A.), [1990] F.C.J. No. 990, (Q.L.), pp. 8 to 10: [...] In my view, it is clear that the judge did not understand the meaning of the word "control". 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. Finally, the fact of giving instructions on the type of wood to be cut and checking it when it is measured does not in itself create a relationship of subordination like that which exists between an employer and an employee. [...] There was evidence in the record on which the judge could find that it was usual for a logger to provide his own power saw. The same is not true, however, for a skidder, a piece of heavy equipment which is of a radically different nature from what a worker would ordinarily be expected to provide under a contract of service. [...] · Elia v. Canada(Minister of National Revenue - M.R.N.), [1998] F.C.J. No. 316, (Q.L.), par. 3: 3 [...] 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. · 671122 Ontario Ltd. v. Sagaz Industries Canada Inc., [2001] 2 S.C.R. 983, (Q.L.), pp. 6, 7, 33, 34, 35, 36, 38, 39, 40 and 41: [...] There is no one conclusive test that can be universally applied to determine whether a person is an employee or an independent contractor. What must always occur is a search for the total relationship of the parties. The central question is whether the person who has been engaged to perform the services is performing them as a person in business on his own account. In making this determination, the level of control the employer has over the worker's activities will always be a factor. However, other factors to consider include whether the worker provides his or her own equipment, whether the worker hires his or her own helpers, the degree of financial risk taken by the worker, the degree of responsibility for investment and management held by the worker, and the worker's opportunity for profit in the performance of his or her tasks. Although the contract designated AIM as an "independent contractor", this classification is not always determinative for the purposes of vicarious liability. Looking at the non-exhaustive list of factors set out in Market Investigations, it is clear, based on the total relationship of the parties, that AIM was an independent contractor. 33 [...] This is distinguished from the relationship of an employer and independent contractor which, subject to certain limited exceptions (see Atiyah, supra, at pp. 327-78), typically does not give rise to a claim for vicarious liability. [...] 34 What is the difference between an employee and an independent contractor and why should vicarious liability more likely be imposed in the former case than in the latter? This question has been the subject of much debate. The answer lies with the element of control that the employer has over the direct tortfeasor (the worker). If the employer does not control the activities of the worker, the policy justifications underlying vicarious liability will not be satisfied. See Flannigan, supra, at pp. 31-32: [Emphasis mine.] [...] Only the worker, authorized to complete a task, could have affected the probability of loss, for he alone had control in any respect. Thus, because there is no mischief where employer control is absent, no remedy is required. 35 [...] Vicarious liability is fair in principle because the hazards of the business should be borne by the business itself; thus, it does not make sense to anchor liability on an employer for acts of an independent contractor, someone who was in business on his or her own account. In addition, the employer does not have the same control over an independent contractor as over an employee to reduce accidents and intentional wrongs by efficient organization and supervision. [...] However, control is not the only factor to consider in determining if a worker is an employee or an independent contractor. For the reasons discussed below, reliance on control alone can be misleading, and there are other relevant factors that should be considered in making this determination. 37 [...] "the essential criterion of employer-employee relations is the right to give orders and instructions to the employee regarding the manner in which to [page1001] carry out his work" [...] 38 [...]A principal inadequacy [with the control test] is its apparent dependence on the exact terms in which the task in question is contracted for: where the contract contains detailed specifications and conditions, which would be the normal expectation in a contract with an independent contractor, the control may even be greater than where it is to be exercised by direction on the job, as would be the normal expectation in a contract with a servant, but a literal application of the test might find the actual control to be less. In addition, the test has broken down completely in relation to highly skilled and professional workers, who possess skills far beyond the ability of their employers to direct.. 39 [...]in Montreal v. Montreal Locomotive Works Ltd., [1947] 1 D.L.R. 161 (P.C.), at p. 169: In earlier cases a single test, such as the presence or absence of control, was often relied on to determine whether the case was one of master and servant, mostly in order to decide issues of tortious liability on the part of the master or superior. In the more complex conditions of modern industry, more complicated tests have often to be applied. It has been suggested that a fourfold test would in some cases be more appropriate, a complex involving (1) control; (2) ownership of the tools; (3) chance of profit; (4) risk of loss. Control in itself is not always conclusive. 40 [...]in Stevenson Jordan and Harrison, Ltd. v. Macdonald, [1952] 1 The Times L.R. 101 (C.A.), at p. 111: One feature which seems to run through the instances is that, under a contract of service, a man is employed as part of the business, and his work is done as an integral part of the business; whereas, under a contract for services, his work, although done for the business, is not integrated into it but is only accessory to it. [Emphasis mine.] · Livreur Plus Inc. v. Canada (Minister of National Revenue - M.N.R.) [2004] F.C.J. No. 267, (Q.L.), par. 20 and 38: 20 [...] A subcontractor is not a person who is free from all restraint, working as he likes, doing as he pleases, without the slightest concern for his fellow contractors and third parties. He is not a dilettante with a cavalier, or even disrespectful, whimsical or irresponsible, attitude. He works within a defined framework but does so independently and outside of the business of the general contractor. The subcontract often assumes a rigid stance dictated by the general contractor's obligations: a person has to take it or leave it. However, its nature is not thereby altered, and the general contractor does not lose his right of monitoring the results and the quality of the work, since he is wholly and solely responsible to his customers. 38 The degree of integration of workers into a business has to be assessed from the standpoint of the workers, not that of the business: 671122 Ontario Ltd. v. Sagaz Industries, [2001] 2 S.C.R. 983, at 1003. Doing so from the standpoint of the business nearly always leads unavoidably to the conclusion that the workers' activities were organized and programmed to suit the principal and overriding activity of the business. In other words, the workers' activities will always appear to be integrated into the business. [41] The Appellants relied on an information bulletin in which a section of the relevant content reads as follows: (Exhibit A-2) (p. 1 to 3) [TRANSLATION] Insurance Policy LIABILITY BULLETIN 97-1 SUBJECT: Liability of Owners-Operators of Forest Machinery [...] Owner-Operator The fact of owning his own machinery is not, in itself, a decisive factor in determining the status of a forestry worker. It is, therefore, possible for an owner-operator to be employed under a contract of service while leasing his machinery to his employer under a lease agreement. In this situation, the employment income is deemed to be wages, and income generated by the machinery constitutes rental income. Written contracts In the case of an owner-operator, it is essential that the agreements relating to the lease of the heavy equipment and to the hiring of the owner-operator pursuant to a contract of service be made in writing. In these circumstances, Revenue Canada will consider the owner-operator to be an employee working in an insurable employment, provided that the conditions set out at page 4 have been met. No written agreement Any situation in which separate written agreements (machinery/employee) do not exist must be examined to determine whether the criteria essential to establishing a contract of service have been met. Where these conditions have not been met, Revenue Canada will consider the owner-operator to be a self-employed worker. Leasing of machinery The machinery lease agreement between the owner-operator (lessor) and the principal contractor (lessee) must include some clauses that show that the lessee is taking control of the machinery for the duration of the agreement. The following points should be covered: (a) the accurate identification of the parties involved, for example, lessor and lessee; (b) the duration of the agreement; (c) the amount of the lease and the terms on which the calculations are based (daily, weekly, hourly, by the cord, by the cubic metre, or length of the logs handled, etc.); (d) the obligations of the lessee and lessor; (e) the contract must be signed by the two parties involved. Contract of employment It is possible that an owner-operator is employed under a valid contract of service; however, in general, each case must be examined in light of the circumstances that surround it. Revenue Canada may conclude that, in all of the cases in which an owner-operator's contract of employment meets all of the conditions set out below, the employment is considered to be performed pursuant to a valid contract of service. [42] Case law and interpretation bulletins are very useful indicators and references that promote consistent and cohesive judgments in similar cases. However, it is important to note that each case, each situation, turns on its own facts. Priority must be given to the principles relating to the facts that are often specific and proper to human relations, which, in turn, are as numerous and varied as there are individuals involved in the issue. [43] Can it be found that the presence of the Payor or of one of its representatives on the work site establishes and demonstrates that control over the facts and of the actions of the individuals who received remuneration existed or could have existed? [44] In this case, the presence of the Payors' representatives, mainly Mr. Gagnon, was not explained by concerns about monitoring or controlling the work performed by the Appellants, but by his love for the forest and his need to be in the woods. [45] The Payors' three representatives acknowledged and repeated that the Appellants knew their work very well, that they performed their work efficiently, productively, and responsibly. In other words, they knew how to get the work done, and they knew what the Payors' requirements were, and throughout the years, they had adjusted accordingly. The Payors were so satisfied with the work of the Appellants that they made sure to offer them work, year after year. [46] Power of control includes the concept of a relationship of subordination. To determine whether a relationship of subordination exists, it is necessary to look beyond some elements and aspects which, I admit, may lead to the conclusion that a contract of service existed. [47] Concern about work well-done and compliance with the applicable legislation and regulations is not a prerogative exclusive to the individuals who perform their work under a contract of service; it is also a requirement of the parties who contract out the work in a contract for services. [48] In this case, the evidence clearly revealed some aspects that are not open to interpretation or that are not cause for confusion. I refer specifically to the fact that the Appellants would not have worked nor performed any work whatsoever for Ambois Inc. and Les entreprises forestières F.G. Inc. had they not owned the skidder for which they paid $24,000 and which had a value ranging from $15,000 to $20,000 during the periods at issue. [49] The Appellants were responsible for all of the expenses relating to the repairs, operation, and maintenance of the skidder. The work of the Appellants depended on the use and proper working order of the skidder. [50] They had even purchased an insurance policy to cover their liability stemming from the use of the skidder. Productivity and efficiency were synonymous with higher income. Losses, breakdowns, etc. could have a direct and significant impact on the Appellants' income. [51] The Appellant Jacky Desbiens stated that breakdowns were always minor and that he always had replacement parts on hand to make repairs quickly and without impact on production overall. More serious problems arose once during the periods at issue, when the engine failed; he repaired it within one day and made up the lost work day. [52] What would have happened if the skidder had been destroyed by fire, given that the Appellants did not have replacement insurance, and they did not have the financial means to replace it? [53] Mr. Desbiens, a forestry engineer, made a powerful argument for the Appellants, whose work was essential to the survival of the two Payors, Ambois Inc. and Les entreprises forestières F.G. Inc. [54] It was shown that the companies had stopped their activities, because the owners of the skidder refused to work from then on, given that they were not eligible for employment insurance benefits, which confirms the very specific status of the Appellants: in fact, they had the power to refuse to work for the Payors. The Appellants, therefore, were independent and had the right to refuse work, which confirms that their status was equal to the Payors'. [55] The Respondent drew the Court's attention to the fact that the Appellants, in their annual income tax returns, described themselves as salaried workers for a portion of their income ("T4") and as contractors for the income generated by the skidder, which amounted to 80% of the proceeds. [56] Aside from expenses that are directly attributable to the operation of the skidder-namely, operation, maintenance, repair, and insurance expenses-the Appellants also deducted, on a number of occasions, meal expenses, expenses relating to a pick-up truck used to travel to the work site, and lodging expenses where travel was required. This is a choice that they made themselves, a choice that is proper to a contract for services, not a contract of service. [57] Regarding the criterion of control, without a doubt the most decisive criterion in an analysis such as this one, the presence of the Payors' representatives was explained. What was the purpose of this nearly continuous presence? Was it to intervene with the Appellants, to coach them, and to impose some authority? The Payors' representatives answered these questions themselves by insisting, a number of times, on the reliability and experience of the Appellants with respect to the performance of the work at issue. Throughout the years, the Appellants learned the Payors' requirements and complied with them strictly, such that the Payors planned their cutting activities around the Appellants' availability. [58] Where a person assigns work of any nature to another person or to a group of people, very often, that person is present from the beginning to the end of the work, which does not change the nature of the contract for services. [59] For example, a homeowner contracts out various work such as landscaping, excavation work, or the installation of interlocking stone. These are situations in which the Payor is present, in which he controls the quality of the performance of the work, without being a party to a contract of service. [60] In this case, the Appellants successfully showed that there were, in fact, specific aspects that corresponded with a contract of service; however, the balance of probabilities does not allow me to conclude that a contract of service existed. [61] For all of these reasons, the appeals must be dismissed. Signed at Ottawa, Canada, this 18th day of August 2004. "Alain Tardif" Tardif J. Translation certified true on this 8th day of March 2005. Colette Dupuis-Beaulne, Translator. CITATION: 2004TCC557 COURT FILE Nos.: 2003-4666(EI); 2003-4667(EI), 2003-4669(EI) and 2003-4670(EI) STYLE OF CAUSE: Richard Desbiens and Jacky Desbiens and the Minister of National Revenue PLACE OF HEARING: Chicoutimi, Quebec DATE OF HEARING: July 21, 2004 REASONS FOR JUDGMENT BY: The Honourable Judge Alain Tardif DATE OF JUDGMENT: August 18, 2004 APPEARANCES: Counsel for the Appellants: Pierre Parent Counsel for the Respondent: Nancy Dagenais COUNSEL OF RECORD: For the Appellants: Name: Firm: City: Pierre Parent Cain Lamarre Casgrain Wells Chicoutimi, Quebec For the Respondent: Morris Rosenberg Deputy Attorney General of Canada Ottawa, Canada