Grondin c. M.R.N.

Grondin c. M.R.N. Court (s) Database Tax Court of Canada Judgments Date 2004-12-13 Neutral citation 2004 TCC 771 File numbers 2003-3136(EI) Judges and Taxing Officers Sylvio J. Savoie Subjects Employment Insurance Act Decision Content Docket: 2003-3136(EI) BETWEEN: SERGE GRONDIN, Appellant, and THE MINISTER OF NATIONAL REVENUE, Respondent. [OFFICIAL ENGLISH TRANSLATION] Appeal heard on October 25, 2004 at Montreal, Quebec Before: The Honourable Justice S.J. Savoie, Deputy Judge Appearances: Counsel for the Appellant: Gilbert Nadon Counsel for the Respondent: Agathe Cavanagh JUDGMENT The appeal is allowed, and the decision by the Minister is vacated in accordance with the attached Reasons for Judgment. Signed at Grand-Barachois, New Brunswick, this 13th day of December 2004. " S.J. Savoie " Savoie D.J. Translation certified true on this 29th day of March 2005. Colette Dupuis-Beaulne, Translator Citation: 2004TCC771 Date: 20041213 Docket: 2003-3136(EI) BETWEEN: SERGE GRONDIN, Appellant, and THE MINISTER OF NATIONAL REVENUE, Respondent. [OFFICIAL ENGLISH TRANSLATION] REASONS FOR JUDGMENT Deputy Judge Savoie, [1] This appeal was heard at Montreal, Quebec on October 25, 2004. [2] This is an appeal regarding the insurability of the Appellant's employment while in the service of l'Ère du Titane Inc., the Payer, for the period from July 14, 2001, to November 29, 2002, the period in question, pursuant to section (1)(a) of the Employment Insurance Act (the "Act"). [3] In his May 7, 2003 letter, the Minister of National Revenue (the "Minister") informed the Appellant of his decision whereby the Appellant did not hold insurable employment because he did not meet the requirements of a contract of service; therefore there was no employee-employer relationship between the Appellant and the Payer. [4] In rendering his decision, the Minister relied on the following assumptions of fact: a) the Payer was incorporated on April 28, 1999; (admitted) b) the Payer ran a jewellery business that specialized in the manufacture of titanium jewellery; (admitted) c) the Payer hired fifteen employees; (admitted) d) in 2001, to expand his business, the Payer purchased an old factory and began restoration work; (admitted) e) the Payer hired subcontractors for the restoration work; (admitted with explanations) f) the Appellant has 17 years of experience as a house painter; (admitted) g) the Appellant was hired as a subcontractor; (denied) h) the Appellant did demolition, painting, and development for the Payer; (admitted with explanations) i) the Payer did not control the Appellant's schedule; (admitted) j) the Appellant decided on which days and hours he wanted to work; (denied) k) the hours worked by the Appellant were not recorded by the Payer; (denied) l) the Appellant set his hourly rate at $16; (admitted with explanations) m) the Payer paid the Appellant based on the fees that the Appellant charged; (admitted with explanations) n) the Appellant was paid by cheque; (admitted) o) the Appellant provided his own supplies such as rollers, paintbrushes, etc.; (admitted) p) the Payer provided the paint; (admitted with explanations) q) the Appellant was supposed to work until the restoration was completed, but the Payer ended the contract with the Appellant because the Appellant's performance did not meet the requirements of the Payer; (admitted) r) on April 23, 2003, the Appellant stated to a representative of the Respondent that he had not submitted a tax return for several years; (admitted with explanations) s) on April 23, 2003, the Appellant stated to a representative of the Respondent that he was receiving social assistance payments while he was working for the Payer. (subject to amplification) [5] The Appellant admitted paragraphs a) to d), f), i), n), o), and q), and denied paragraphs g), j), and k); he admitted with explanations paragraphs e), h), l), m), p), and r). [6] According to the evidence, the Payer purchased a building for the purpose of expanding his business. He purchased an old disused factory with the intention of restoring it. He hired a team, including the Appellant, to do the restoration work. The team's foreman was David Richard. He was self-employed; Alexandre Bouchard was a salaried worker. The Appellant was paid at an hourly rate of $8. He accepted this rate despite the fact that he had expected a rate of $20. He admitted to having done some work under the table for the Payer. The other employees were paid in cash. The workers, according to the evidence, worked for six months to complete the restoration. [7] The workers did demolition work, cleaned the building, expanded it to make it functional, and painted it and fitted it up. It was established that this team did all the fitting-up for the building except for specialized work. [8] In his testimony, the Appellant revealed that the Payer had agreed to pay him at an hourly rate of $16. Because he was receiving social assistance payments, the Appellant accepted this rate. According to his testimony, he worked 40, 50, and even up to 76 hours per week, and he recorded his hours on the door of the cafeteria; otherwise he was not paid. To finance his project, the Payer had negotiated some loans: one was with the National Bank for $175,000, and the other was for $675,000 with another financial institution. [9] The Appellant stated that he did not have a qualification card, but that he was a "hard worker." He confirmed that he had been under the supervision of foreman David Richard, who was always on the premises. David Richard managed the job site; he even set up accommodations for himself there. Philippe Payette, the Payer's owner, was rarely on the job site. However, he brought materials and tools to the site and left instructions. It was established that work on the job site was set according to precise schedules and priorities so as to be able to benefit from the lending institutions' advances. The Payer's project was frequently affected by critical funding shortfalls. [10] It was established that the Payer reduced the Appellant's salary to $8 per hour for the last two to three months of the period in question. The Appellant explained that the Payer took advantage of him because he was an alcoholic. After having reduced the Appellant's salary to $8 per hour, the Payer promised the Appellant a salary of $15 per hour if the Appellant reported to work on time the following week. [11] Toward the end of the period in question, the Payer paid the Appellant very little or not at all. Often, the Appellant was paid in cash. The Payer promised to pay the Appellant his salary from the $175,000 advance from the National Bank, but never did. Later, the Payer promised to pay the Appellant from the $675,000 loan, but in order to obtain it the Payer had to prove that the work was 75% completed. He did provide proof, but still the Appellant did not receive his pay. Furthermore, the Payer dismissed him and sent him to the Dollard Cormier Centre, a treatment facility for alcoholics. [12] It was established that the Appellant filed a complaint against the Payer to the Labour Standards Commission on the grounds that the Payer had not paid him for his overtime hours, his notice, and his vacation pay. The Appellant confirmed that the Commission had found in his favour and ordered the Payer to pay the Appellant "$2,416.84 minus statutory deductions..." According to the Appellant, he has still not received anything from the Payer. However, the Appellant was unable to document the Commission's decision. He explained that while his complaint was before the Commission and during the period that followed, he was undergoing treatment for alcoholism, and then was imprisoned at Bordeaux. He concluded by saying that for a period of 9 months, which ended on August 12, 2004, he was not able to manage his affairs. [13] This Court gave the Appellant 10 days to provide the documentation concerning his complaint to the Labour Standards Commission, and his counsel did provide the documentation to the Court. [14] During the hearing, the Appellant produced 4 paycheques that he had received from the Payer (exhibit I-2). The paycheques prove that for the period in question, i.e. from September 6 to October 4, 2002, he was working an average of 58.25 hours per week, at an average hourly rate of $7.94. [15] It must be recognized that these facts serve to corroborate the Appellant's testimony on this particular aspect. [16] It was established that the only tools the Appellant had were a paintbrush and two trowels. All the other tools used by the Appellant were provided by the Payer, who either bought or rented them. [17] The question is whether the Minister's decision, at the end of this hearing, is in compliance with the Act, the doctrine and the precedents with respect to the insurability of the Appellant's employment. [18] In making his decision, the Minister relied on paragraph 5(1)(a) of the Act to determine that the Appellant's employment was not insurable. Paragraph 5(1)(a) reads as follows: Subject to subsection (2), insurable employment is a) employment in Canada by one or more employers, under any express or implied contract of service or apprenticeship, written or oral, whether the earnings of the employed person are received from the employer or some other person and whether the earnings are calculated by time or by the piece, or partly by time and partly by the piece, or otherwise; [...] [19] According to the well-known case of Wiebe Door Services Ltd. v. M.N.R, [1986] 3 F.C. 553 (FCA), the courts have established a series of tests to be used in making a determination in a case like this one, namely: 1. degree of control over the work or the worker; 2. ownership of tools; 3. chance of profit or risk of loss; 4. integration of the employee's work in the Payer's business. [20] In Charbonneau v. Canada(Minister of National Revenue - M.N.R.), [1996] F.C.J. No. 1337, Décary J.A. of the Federal Court of Appeal had this to say about tests: The tests laid down by this Court in Wiebe Door Services Ltd. v. M.N.R. - on the one hand, the degree of control, the ownership of the tools of work, the chance of profit and risk of loss, and on the other, integration - are not the ingredients of a magic formula. They are guidelines which it will generally be useful to consider, but not to the point of jeopardizing the ultimate objective of the exercise, which is to determine the overall relationship between the parties. The issue is always, once it has been determined that there is a genuine contract, whether there is a relationship of subordination between the parties such that there is a contract of employment (art. 2085 of the Civil Code of Québec) or, whether there is not, rather, such a degree of autonomy that there is a contract of enterprise or for services (art. 2098 of the Code). In other words, we must not pay so much attention to the trees that we lose sight of the forest - a particularly apt image in this case. The parts must give way to the whole. [21] The evidence should, therefore, be examined in light of the above-noted tests. [22] The facts in this case, examined using the tests of ownership of tools and chance of profit or risk of loss, do not pose any problems and support the conclusion that the Appellant held insurable employment. In this connection, the evidence provided by the Appellant was uncontradicted by the Minister. Control [23] Regarding the control test, the application determined by the courts must be recognized, particularly the determination made by by Marceau J. in Caron v. M.N.R., [1987] F.C.J. No. 270: ... On the question of whether there was in fact a contract of service, the judge did not dispute that there was a contractual relationship but questioned whether that relationship had produced a contract of service or a contract for services, and his conclusion that the employer did not have the control over the employee's work which is characteristic of a contract of service is contained in the following paragraph: With regard to control of the appellant's work by the employer, Roberto Caron, the evidence provided facts that we must analyse in terms of control, because the recipient of the services exercises such control over the work of the provider of the services, thus constituting the subordinate relationship characteristic of a contract of service. However, the degree of control varies with the circumstances and the nature of the work to be done. The appellant's work consisted in logging, which obviously required experience, which the appellant had. On the other hand, the employer, Roberto Caron, who was a truck driver, admitted that neither he nor his mother had any experience in this field. Since neither the employer nor his mother had any experience, they could exercise no control whatever over the appellant's work. Even though he went to the worksite on Saturdays to inspect the work and even though his mother saw the logs cut by the appellant being hauled away, that did not prove that the required control was being exercised over the appellant's work. It can be said that there was a total absence of control by the employer, Roberto Caron, and his mother. Moreover, the employer stated that he gave the appellant full leeway in his work. He confined himself merely to checking on Saturdays at quitting time to see whether or not the work had been done. In my view, in considering the situation the judge relied on a concept of control which goes beyond that which is legally required to establish a master-servant relationship. If such a concept were to be accepted, a contract of service could never be created between an employer inexperienced in performing the work to be done and an employee whose occupation is the performance of such work. [24] I must add that there is abundant case law that defines the Payer's control as the power of control over the worker rather than "de facto" control. [25] Pratte J.A. of the Federal Court of Appeal recognized this principle in Ranjit Darbhanga v. M.N.R., [1995] F.C.J. No. 470, stating: The decision of the Tax Court of Canada to the effect that the applicant did not hold insurable employment seems to be based on the assumption that, as her alleged employer was sick when she worked for him and could not, for that reason, supervise her work, it necessarily followed that her work had been done under a contract for services rather than under a contract of service. That is an error. A contract may be a contract of service even though the employer does not supervise the work of the employee if he actually has that right. That was obviously the situation here. [26] Pratte J.A. of the Federal Court of Appeal also considered the notion of control in determining whether there is a contract of service. In Raymond-Guy Gallant v. M.N.R., [1986] F.C.J. No. 330 he said the following: ... The distinguishing feature of a contract of service is not the control actually exercised by the employer over his employee but the power the employer has to control the way the employee performs his duties... [27] It is true that the Payer was not often on the job site, but he visited it from time to time, according to the evidence, to bring materials and tools and to leave instructions in accordance with the project priorities. However, he had a foreman on the job site at all times; the foreman even slept there. The foreman supervised the Appellant's work. This evidence was uncontradicted. Examined using these criteria, the facts support the Appellant's position. Integration of the employee's work in the Payer's business [28] Counsel for the Minister argued that the Appellant's work was not at all a part of the Payer's business, since the Payer is a jeweller. [29] It should nevertheless be noted that the Minister recognized this activity of the Payer when he wrote the following in his Reply to the Notice of Appeal in paragraph 6 (d): in 2001, to expand his business, the Payer purchased an old factory and began restoration work. [30] The Payer's restoration project was directly linked to the main business that he wanted to expand. [31] In analyzing the Appellant's work using the organization or integration test, it is appropriate to refer to the Supreme Court of Canada's interpretation in 671122 Ontario Ltd. v. Sagaz Industries, [2001] 2 S.C.R. 983, where Major J., relying heavily on the decision of MacGuigan J. in Wiebe Door Services v. M.N.R., [1986] 3 F.C. 553, had this to say: MacGuigan J. recognizes that despite these criticisms, the organization test may be useful (p. 563): Of course, the organization test of Lord Denning and others produces entirely acceptable results when properly applied, that is, when the question of organization or integration is approached from the persona of the "employee" and not from that of the "employer," because it is always too easy from the superior perspective of the larger enterprise to assume that every contributing cause is so arranged purely for the convenience of the larger entity. We must keep in mind that it was with respect to the business of the employee that Lord Wright [in the Montreal case] addressed the question "Whose business is it?" [My emphasis.] According to MacGuigan J., Cooke J. came up with the best synthesis of the problem in Market Investigations, Ltd. v. Minister of Social Security, [1968] 3 All E.R. 732 (Q.B.D.), p.737-738 (followed by the Privy Council in Lee Ting Sang v. Chung Chi-Keung, [1990] 2 A.C. 374, lord Griffiths, p. 382): The observations of LORD WRIGHT, of DENNING, L.J., and of the judges of the Supreme Court in the U.S.A. suggest that the fundamental test to be applied is this: "Is the person who has engaged himself to perform these services performing them as a person in business on his own account?". If the answer to that question is "yes", then the contract is a contract for services. If the answer is "no" then the contract is a contract of service... [32] In the exercise engaged in by this Court, it is helpful to keep in mind what Major J. had to say in Sagaz, supra, where he held: Although there is no universal test to determine whether a person is an employee or an independent contractor, I agree with MacGuigan J.A. that a persuasive approach to the issue is that taken by Cooke J. in Market Investigations, supra. 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. It bears repeating that the above factors constitute a non-exhaustive list, and there is no set formula as to their application. The relative weight of each will depend on the particular facts and circumstances of the case. [33] In addition, as suggested by Major J. in Sagaz, supra, the central question for this Court 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 response to this question, this Court must answer that the facts have clearly established that the Appellant did not work as a person in business on his own account. [34] The Appellant had the burden of proving, on a balance of probabilities, that the facts accepted by the Minister were false. In my view, he has discharged this burden since the examination of the evidence, in light of the criteria set by case law and stated above, warrants the intervention of this Court. [35] According to the evidence, the Appellant worked for the Payer for a period of 20 weeks at a rate of 58.25 hours per week, averaging an hourly rate of $7.94 per hour. Therefore, the insurable earnings of the Appellant, pursuant to the Insurable Earnings and Collection of Premiums Regulations,are determined in accordance with subsection 2(2) and amount to $9,250. [36] It was shown on a balance of probabilities that the Appellant held insurable employment within the meaning of the Act during the period in question. [37] Consequently, the appeal is allowed and the decision by the Minister is vacated. Signed at Grand-Barachois, New Brunswick, this 13th day of December 2004. " S.J. Savoie " Savoie D.J. Translation certified true on this 24th day of March 2005. Colette Dupuis-Beaulne, Translator CITATION: 2004TCC771 COURT FILE NUMBER: 2003-3136(EI) STYLE OF CAUSE: Serge Grondin v. M.N.R. PLACE OF HEARING: Montreal, Quebec DATE OF HEARING: October 25, 2004 REASONS FOR JUDGMENT BY: The Honourable Justice S.J. Savoie, Deputy Judge DATE OF JUDGMENT: December 13, 2004 APPEARANCES: For the Appellant: Gilbert Nadon For the Respondent: Agathe Cavanagh COUNSEL OF RECORD: For the Appellant: Name: Gilbert Nadon Firm: Ouellet, Nadon, Barabé, Cyr, De Merchant, Bernstein, Cousineau, Heap, Palardy, Gagnon, Tremblay Montreal, Quebec For the Respondent: Morris Rosenberg Deputy Attorney General of Canada Ottawa, Canada