[OFFICIAL ENGLISH TRANSLATION]
2000-4739(EI)
BETWEEN:
MICHEL SIMARD,
Appellant,
and
THE MINISTER OF NATIONAL REVENUE,
Respondent.
Appeal heard on June 14, 2002, at Chicoutimi, Quebec, by
the Honourable Judge S.J. Savoie
Appearances
Counsel for the Appellant: Gilbert Nadon
Counsel for the Respondent: Julie David
JUDGMENT
The appeal is dismissed and the Minister's decision is confirmed in accordance with the attached Reasons for Judgment.
Signed at Grand-Barachois, New Brunswick, this 9th day of September 2002.
|
"S. Savoie" |
D.J.T.C.C.
Translation certified true
on this 9th day of December 2003.
Erich Klein, Revisor
[OFFICIAL ENGLISH TRANSLATION]
Date: 20020909
Docket: 2000-4739(EI)
BETWEEN:
MICHEL SIMARD,
Appellant,
and
THE MINISTER OF NATIONAL REVENUE,
Respondent.
REASONS FOR JUDGMENT
Savoie, D.J.T.C.C.
[1] This appeal was heard at Chicoutimi, Quebec, on June 14, 2002.
[2] The appeal concerns the insurability within the meaning of the Employment Insurance Act (the "Act") of the appellant's employment with Produits forestiers Alliance inc. (the "payer") during the periods from November 12, 1998 to January 26, 1999, from April 19 to July 16, 1999, from August 9 to October 14, 1999, and from October 25, 1999 to January 27, 2000 (the "periods at issue").
[3] In reaching his decision, the Minister of National Revenue (the "Minister") relied on the following assumptions of fact:
[TRANSLATION]
(a) the payer operated a timber harvesting business;
(b) the appellant was the sole shareholder of 2425-9483 Québec Inc (hereinafter referred to as "the contractor");
(c) the contractor owned a John Deere skidder valued at over $150,000;
(d) on July 6, 1998, and May 12, 1999, the payer signed a machinery rental contract with the contractor;
(e) the payer paid the contractor according to the volume of wood cut;
(f) the appellant operated the contractor's machinery;
(g) the payer paid the appellant's wages directly to him;
(h) the payer deducted the appellant's wages, including tax deductions and employer and employee contributions, from the monies owing to the contractor;
(i) the appellant worked days one week and nights the next;
(j) the contractor was required to take out, at its own expense, sufficient insurance for the machinery and its operator;
(k) the contractor was responsible for maintaining the machinery;
(l) the payer did not pay the appellant any wages when the machinery broke down;
(m) the payer did not assign other duties to the appellant when the machinery broke down;
(n) the appellant was employed by the contractor and not by the payer.
[4] The appellant admitted all of the Minister's assumptions of fact, except those set out in subparagraphs (i) and (j), which he wishes to clarify. The appellant denied subparagraphs (l), (m) and (n).
[5] With regard to the assumptions set out in subparagraphs (i) and (j), the appellant explained that during the last year of the periods at issue he only worked nights.
[6] By letters dated November 2, 2000, the Minister informed the appellant of his decisions that the appellant did not hold insurable employment during the periods at issue because his employment did not meet the requirements for a contract of service, and there was thus no employer-employee relationship.
[7] In addition, the Minister determined that the actual employer was 2425-9483 Québec Inc. and that the employment in question was not insurable because the appellant controlled more than 40% of that corporation's voting shares, which was admitted. In making his decision, the Minister relied on paragraphs 5(1)(a) and 5(2)(b) of the Act, which read as follows:
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;
. . .
(2) Insurable employment does not include
. . .
(b) the employment of a person by a corporation if the person controls more than 40% of the voting shares of the corporation;
. . .
[8] It is settled law that the burden of proof is on the appellant.
[9] In Sylvie Desroches v. M.N.R. (A-1470-92), the Federal Court of Appeal defines the function of a Tax Court of Canada judge as follows:
. . . However, in the final analysis, as this Court held in Attorney General of Canada v. Jacques Doucet, it is the Minister's determination which is at issue, namely that the employment was not insurable because the applicant and the payer were not bound by a contract of service. The function of the Tax Court of Canada judge extended to considering the record and the evidence in its entirety. . . .
[10] Each case stands on its own merits. It was incumbent on the appellant to establish on the balance of evidence that the Minister's decision was ill-founded. Sections 103 and 104 of the Act confer on the Tax Court of Canada broad remedial powers. These powers enable this Court to resolve any dispute of a factual nature and to vacate, confirm or vary the Minister's determination.
[11] Mr. Hugo Chayer testified for the appellant. He is a human resources supervisor at Bowater, a successor company to the payer. In his testimony, he described the relationship between the various stakeholders in the industry and the operating procedure for harvesting wood in forests.
[12] On the evidence, the era in which the lumberjack, equipped with his chain saw, operated his own small business in the forest is long gone.
[13] Today, forestry workers use equipment such as tree fellers, cable skidders and grapple skidders, machinery that enables single operators, who can also work at night, to harvest timber, thus making operations in the forest possible 24 hours a day. Forestry work has become mechanized; the labour force has been significantly reduced. Forestry work has evolved to such an extent that timber harvesters are unionized.
[14] All these changes have transformed the relationship between workers and payers. Payers, who in the past owned the costly heavy machinery required, have become renters of this same equipment, which now belongs to the worker who operates it. The worker turns over the machinery to a corporation that he controls, and a contract to rent this machinery to the payer-lessee is then entered into. Such arrangements have become the norm in this industry, and disputes before this Court have resulted from this trend.
[15] That situation led Revenue Canada to issue a communiqué, which was submitted to the Court. It is dated July 8, 1997, and the first paragraph reads as follows:
[TRANSLATION]
The purpose of this communiqué is to clarify our policy on workers in the forestry industry who, in addition to providing services to a contractor, rent their heavy machinery to the same contractor.
[16] At this point, it is appropriate to quote the other relevant parts of the communiqué:
[TRANSLATION]
Owner-operator
2. The fact that a forestry worker owns his own machinery is not in itself a conclusive factor in determining his employment status. It is therefore possible for an owner-operator to be hired under a contract of service while renting his machinery to his employer under a rental contract. In that situation, employment income is considered as being salary and the income from the machinery constitutes rental income.
Written contracts
3. It is essential that the agreements concerning the rental of the owner-operator's heavy machinery and the hiring of the owner-operator under a contract of service be put in writing. Under those circumstances, the owner-operator will be considered as an employee holding insurable employment provided that the conditions outlined in paragraph 7 are met.
No written contract
4. Any situation in which there are no separate agreements in writing (employee-machinery) shall be reviewed in order to determine whether the essential tests for establishing the existence of a contract of service are met. If those conditions are not met, then the owner-operator will be deemed to be self-employed.
Leasing of Machinery
5. The machinery rental contract between the owner-operator (lessor) and the prime contractor (lessee) must include certain clauses indicating that the lessee assumes control of the machinery for the duration of the agreement. The following points should be covered in the contract:
(a) the precise identification of the parties involved, for example, lessor and lessee;
(b) the duration of the agreement;
(c) theamount of the rental and, if appropriate, the method of calculation (hourly, daily, weekly, per cord, per cubic metre or by the length of the logs handled, etc.);
(d) the responsibilities of the lessee and the lessor; and
(e) the contract must be signed by the two parties involved.
Contract of employment
6. While it is possible for an owner-operator to be hired under a valid contract of service, in general, each case must be examined on the basis of its surrounding circumstances. However, it is possible to conclude that in all cases where the contract of employment of an owner-operator meets the conditions listed in paragraph 7, the employment will be considered as employment under a valid contract of service.
7. Those conditions are:
(a) the employment and machinery rental contracts must be separate;
(b) the method of remuneration (hourly, daily, by the piece, etc.) must be indicated in the contract;
(c) the employer must have the right to control the way the work will be done; generally, this control is exercised by a foreman on the worksite;
(d) the employer tells the worker where and for how long he will render the services (location or site-schedule, duration of the employment);
(e) the employer has the right to decide what type of work the operator will do;
(f) the services of the owner-operator must not be directly tied to the operation of his machinery; in case of a major breakdown, for example, the operator may be required by the employer to carry out other duties for which he will be paid accordingly; and
g) the employer is responsible for any damage and injuries caused by the operator in the performance of his duties, including any injuries suffered by the operator.
[17] In response to this communiqué, the appellant produced, as Exhibit A-2, the lease agreement between the contractor and the payer. It reads as follows:
[TRANSLATION]
LEASE OF PERSONAL SERVICES
1. The Contractor shall be responsible for maintaining and repairing the equipment for the entire duration of this contract, and shall assume the costs thereof.
The CONTRACTOR authorizes the COMPANY to deduct from the payments provided for in this contract all deductions at source that are required by government authorities and by the collective agreement in force, in addition to the charges for any labour and/or merchandise provided by the COMPANY for the operation or maintenance of the movable described in this contract.
2. When required by law, in any respect whatsoever, the CONTRACTOR agrees to obtain and maintain, at its own cost, adequate insurance coverage.
3. Any property used by the CONTRACTOR to provide the services described in this contract is so used at the CONTRACTOR'S own risk, and the CONTRACTOR holds the COMPANY its representatives, employees, agents, servants, successors and assigns harmless with respect to any damage to or loss of the said property.
4. For payment purposes, the CONTRACTOR shall accept:
the record of hours worked;
the quantity, volume and quality of piecework, the whole as recorded by the COMPANY.
5. The CONTRACTOR agrees not to advance any claim for delays or loss of time.
6. This contract is a personal contract and it cannot be assigned, in whole or in part, by the CONTRACTOR without the prior consent of the COMPANY.
7. It is understood that either party may terminate this contract at any time by providing notice in writing to the other party.
8. The CONTRACTOR agrees, where applicable, to comply with the orders of the occupational health and safety board in the province in which operations shall take place, and to that end, the CONTRACTOR authorizes the COMPANY to make the required deductions and to pay its employees in accordance with the COMPANY'S compensation system, the whole to be deducted from the payments provided for in this contract.
9. The CONTRACTOR agrees to comply and, where applicable, to ensure that its employees comply, with the COMPANY'S regulations and with government regulations, particularly those concerning safety, and with the requirements in the collective agreement that are applicable to the operations to be carried out under this contract.
THIS CONTRACT IS MADE:
BETWEEN
LESSEE
Produits forestiers Alliance inc.
200 De Quen Street
Dolbeau-Mistassini, Quebec
G8M 1M1
AND
LESSOR
Forestiers BerMan inc.
1913 Sacré-Coeur Boulevard
Dolbeau, Quebec
G8L 2A5
Machine number: 2280
Representative(s): Emmanuel Labrecque
1) In consideration of the payments referred to hereunder, the LESSOR agrees to render personal services to the LESSEE using the movable described below, in accordance with the following terms and conditions. It is understood that the contractor shall assume full responsibility for the performance of the said services.
DESCRIPTON OF SERVICES RATE
Equipment, make and year: 1997 Timberjack Per
Serial No.: 977054 attached
Model: 2628 agreement
Registration: V621891-5
2) All of the terms and conditions set out on the back of this contract form an integral part hereof.
3) This lease of personal services shall be renewed from year to year unless the description of services is altered.
Contract signed in duplicate this 05-05-99 .
________________________ ______________________
LESSOR LESSEE
THIS CONTRACT IS MADE:
BETWEEN
LESSEE
Produits forestiers Alliance inc.
200 De Quen Street
Dolbeau-Mistassini, Quebec
G8L 5M8
AND
LESSOR
Forestiers BerMan inc.
1913 Sacré-Coeur Boulevard
Dolbeau, Quebec
G8L 2A5
Machine number: 2703
Representative(s): Emmanuel Labrecque
1) In consideration of the payments referred to hereunder, the LESSOR agrees to render personal services to the LESSEE using the movable described below, in accordance with the following terms and conditions. It is understood that the contractor shall assume full responsibility for the performance of the said services.
DESCRIPTION OF SERVICES RATE
Equipment: Multifunctional tree feller
1997 Timberjack Per
Serial No.: 977054 attached
Model: 2628 agreement
Registration: V621891-5
2) All of the terms and conditions set out on the back of this contract form an integral part hereof.
3) This lease of personal services shall be renewed from year to year unless the description of services is altered.
Contract signed in duplicate this June 5, 2000 .
________________________ ______________________
LESSOR LESSEE
[18] Upon examining the terms of the lease agreement in light of Revenue Canada's communiqué, an attempt to compare the two documents reveals a significant gap between them.
[19] For example, the condition set out in subparagraph 5(c) of the communiqué has definitely not been included in the lease agreement. Subparagraph 5(c) reads as follows:
[TRANSLATION]
the amount of the rental and, if appropriate, the method of calculation (hourly, daily, weekly, per cord, per cubic metre or by the length of the logs handled, etc.).
[20] The same is true with regard to the following subparagraphs of the communiqué:
[TRANSLATION]
7. (a) the employment and machinery rental contracts must be separate;
(b) the method of remuneration (hourly, daily, by the piece, etc.) must be indicated in the contract;
(c) the employer must have the right to control the way the work will be done; generally, this control is exercised by a foreman on the worksite;
(d) the employer tells the worker where and for how long he will render the services (location or site-schedule, duration of the employment);
(e) the employer has the right to decide what type of work the operator will do;
(f) the services of the owner-operator must not be directly tied to the operation of his machinery; in case of a major breakdown, for example, the operator may be required by the employer to carry out other duties for which he will be paid accordingly; and
(g) the employer is responsible for any damage and injuries caused by the operator in the performance of his duties, including any injuries suffered by the operator.
[21] However, Exhibit A-2, which sets out the terms of the agreement between the contractor and the payer, states the following in paragraph 3:
[TRANSLATION]
Any property used by the CONTRACTOR to provide the services described in this contract is so used at the CONTRACTOR'S own risk, and the CONTRACTOR holds the COMPANY, its representatives, employees, agents, servants, successors and assigns harmless with respect to any damage to or loss of the said property.
[22] The appellant, who denied that the payer did not pay him any wages when the machinery broke down, brandished the collective labour agreement, filed as Exhibit A-1. Article 23 thereof stipulates that in case of the breakdown of a machine:
[TRANSLATION]
. . . during a workday, employees assigned to operate that machine are entitled to compensation at the occupational rate, up to a maximum of nine (9) hours from the time that the breakdown is verified by the supervisor.
If the breakdown is not repaired on the second day, the employees are entitled to compensation at the occupational rate, up to a maximum of four and one-half (4 1/2) hours.
[23] These provisions set the compensation limit for loss of income due to a major equipment breakdown. When this was put to him, the appellant explained that major breakdowns in these pieces of equipment are rare due to the high quality of maintenance that the equipment receives. The question of who, in this particular instance, incurred the loss if, however, such a breakdown occurred, remained unanswered. The document entitled [TRANSLATION] "Lease of Personal Services," Exhibit A-2, states that:
[TRANSLATION]
The CONTRACTOR agrees not to advance any claim for delays or loss of time.
[24] It is true, as the appellant claims, that some of the conditions listed in the communiqué are included in the collective labour agreement. However, not all of them are included. It should be noted that most of these conditions represent nothing more than what is already stated in the subparagraphs on which the Minister relied in making his determination.
[25] In her argument, counsel for the Minister called for the application of the principles established in the following cases:
1. Canada (Attorney General) v. Rousselle (F.C.A.), [1990] F.C.J. No. 990;
2. Coopérative Forestière des Hautes-Laurentides v. Canada (Minister of National Revenue - M.N.R.), [1996] T.C.J. No. 469;
3. Charbonneau v. Canada (Minister of National Revenue - M.N.R.), [1996] F.C.J. No. 1337;
4. Girard c. Canada (ministre du Revenu national - M.R.N.), [2000] A.C.I. no 35.
[26] InCoopérative Forestière des Hautes-Laurentides, supra, Judge Cuddihy of this Court stated in the following terms the principles and tests laid down in the relevant case law:
I must adopt the reasoning used by Desjardins J.A. of the Federal Court of Appeal in Hennick, [See Note 2 below] and I quote:
______________________________________________________
Note 2: The Attorney General of Canada v. Gayle Hennick and Royal Conservatory of Music, A-328-94, February 22, 1995.
______________________________________________________
While this text is well known, it might be useful at the outset to emphasize that in his analysis of both Lord Wright's fourfold test (control, ownership of the tools, chance of profit, risk of loss) and of Lord Denning's organization or integration test, MacGuigan J.A. in Wiebe Door Services Ltd., stressed all along that what remains of the essence is the search for the total relationship of the parties. He first quoted at length Lord Wright in Montreal v. Montreal Locomotive Works Ltd. [See Note 3 below]
______________________________________________________
Note 3: [1947] 1 D.L.R. 161 (P.C.), at 167-70.
______________________________________________________
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. Thus the master of a chartered vessel is generally the employee of the shipowner though the charterer can direct the employment of the vessel. Again the law often limits the employer's right to interfere with the employee's conduct, as also do trade union regulations. In many cases the question can only be settled by examining the whole of the various elements which constitute the relationship between the parties. In this way it is in some cases possible to decide the issue by raising as the crucial question whose business is it, or in other words by asking whether the party is carrying on the business, in the sense of carrying it on for himself or on his own behalf and not merely for a superior.
[Emphasis in text]
Then, he added: [See Note 4 below]
______________________________________________________
Note 4: Wiebe Door Services Ltd. at 562-63.
______________________________________________________
. . . I interpret Lord Wright's test not as the fourfold one it is often described as being but rather as a four-in-one test, with emphasis always retained on what Lord Wright, supra, calls "the combined force of the whole scheme of operations," even while the usefulness of the four subordinate criteria is acknowledged.
. . . What must always remain of the essence is the search for the total relationship of the parties . . .
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 addressed the question "Whose business is it?"
[my emphasis]
[27] In Rousselle, supra, the Federal Court of Appeal also reviewed the principles and tests set out above and, in circumstances similar to those herein, that court, speaking through Hugessen J.A., stated the following:
In my view, it is clear that the Tax Court of Canada judge misunderstood and so misapplied several of the criteria mentioned above.
First, as regards the factor of "control", it is established that the respondents worked by themselves in the forest at a location some distance from the employer's place of business. There was no representative of the employer on the spot and so no direct supervision.
Each of the respondents was free to work when he wanted and the hours he wanted. Once a week at most, Mr. Chiasson went to the location to measure the wood cut. As we have seen, it was agreed in advance that each respondent would work only the minimum number of weeks necessary to qualify for unemployment insurance.
. . .
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.
[28] The evidence showed that the payer's foremen marked the trees. However, the workers prepared the time sheets and submitted them to the foreman once a week. The Appellant testified that:
[TRANSLATION]
. . . the foremen tell us what to do. We do not see them often. We stay at the logging camp from Monday to Friday.
[29] It has been established that the contractor agreed to comply and, where applicable, to ensure that its employees complied, with the payer's regulations. The payer recognizes that the worker was under the contractor's supervision. This is in accordance with the contract that they signed. However, it must be remembered that the worker is the contractor's sole shareholder, and therefore, in that context, the worker is responsible for his own supervision.
[30] As regards the ownership of tools, the contractor unquestionably owned the equipment, and the appellant was the worker who operated it. The employer did not provide any tools.
[31] As regards the chance of profit and the risk of loss, it is important to emphasize that the worker's remuneration was split in order to clearly show that all profits and losses were those of 2425-9483 Québec Inc., represented by its sole shareholder, the worker. Thus, it was not the payer that incurred on behalf of the worker the most costly risks under the overall agreement. The profit lay in the remuneration paid to 2425-9483 Québec Inc., and to the worker, its sole shareholder. In fact, the two were inseparable.
[32] With respect to the integration test, it must be recognized that the worker and the payer are involved in the same field of activity. However, this Court does not believe that the payer's project would have got underway without the worker.
[33] 2425-9483 Québec Inc. was the worker's business. Thus, the worker and his company, 2425-9483 Québec Inc., became integrated with the appellant at the beginning of the project in order to carry out the agreed work. However, one must recognize that the meaning and scope of a contract is determined not by the title the contract is given, but rather by the relationships between the parties and by the parties' conduct. That is what determines the true nature of the resulting contract.
[34] It should be noted-and this fact is significant-that the contract between the payer and the worker does not set any rate of pay and thus cannot create an employer-employee relationship, as the rate of pay is an element essential to the existence of insurable employment.
[35] This Court therefore concludes that the Appellant did not hold insurable employment during the periods at issue because his employment did not meet the requirements for a contract of service. Thus, there was no employer-employee relationship.
[36] In addition, the appellant's actual employer was 2425-9483 Québec Inc. However, his employment with that employer is not insurable because the appellant controlled more than 40% of the voting shares of that corporation.
[37] In the opinion of this Court, this decision is supported by well-settled case law in which, in similar circumstances, employment held under the same conditions was found to be non-insurable. This Court wishes to make it clear that it is referring to the aforementioned cases, namely:
1. Rousselle;
2. Coopérative Forestière des Hautes-Laurentides;
3. Charbonneau;
4. Girard.
[38] Therefore, the appeal is dismissed and the Minister's decision is confirmed.
Signed at Grand-Barachois, New Brunswick, this 9th day of September 2002.
|
"S. Savoie" |
D.J.T.C.C.
Translation certified true
on this 9th day of December 2003.
Erich Klein, Revisor