Barbeau v. M.N.R.

Barbeau v. M.N.R.
Court (s) Database
Tax Court of Canada Judgments
Date
2015-05-22
Neutral citation
2015 TCC 131
File numbers
2012-4560(EI), 2013-2811(EI)
Judges and Taxing Officers
Robert James Hogan
Subjects
Employment Insurance Act
Decision Content
Docket: 2012-4560(EI)
BETWEEN:
DIANE BARBEAU,
Appellant,
and
THE MINISTER OF NATIONAL REVENUE,
Respondent.
[OFFICIAL ENGLISH TRANSLATION]
Appeal heard on common evidence with the appeal of
Diane Barbeau (2013-2811(EI)),
on January 23, 2015, at Ottawa, Canada.
Before: The Honourable Justice Robert J. Hogan
Appearances:
Agent for the appellant:
Yves Grenier
Counsel for the Respondent:
Carole Plourde
JUDGMENT
The appeal is allowed and the decision of the Minister of National Revenue dated August 2, 2012, is vacated on the basis that Marc Martineau was not engaged in insurable employment during the period from September 3, 2010, to July 9, 2011, in accordance with the attached Reasons for Judgment.
Signed at Ottawa, Canada, this 22nd day of May 2015.
“Robert J. Hogan”
Hogan J.
Translation certified true
on this 31st day of August 2015
Daniela Guglietta, Translator
Docket: 2013-2811(EI)
BETWEEN:
DIANE BARBEAU,
Appellant,
and
THE MINISTER OF NATIONAL REVENUE,
Respondent.
[OFFICIAL ENGLISH TRANSLATION]
Appeal heard on common evidence with the appeal of
Diane Barbeau (2012-4560(EI)),
on January 23, 2015, at Ottawa, Canada.
Before: The Honourable Justice Robert J. Hogan
Appearances:
Agent for the appellant:
Yves Grenier
Counsel for the Respondent:
Carole Plourde
JUDGMENT
The appeal is allowed and the decision of the Minister of National Revenue dated September 10, 2012, is vacated on the basis that Mélanie Hamel was not engaged in insurable employment during the period from September 1, 2010, to September 8, 2011, in accordance with the attached Reasons for Judgment.
Signed at Ottawa, Canada, this 22nd day of May 2015.
“Robert J. Hogan”
Hogan J.
Translation certified true
on this 31st day of August 2015
Daniela Guglietta, Translator
Citation: 2015 TCC 131
Date: 20150522
Dockets: 2012-4560(EI)
2013-2811(EI)
BETWEEN:
DIANE BARBEAU,
Appellant,
and
THE MINISTER OF NATIONAL REVENUE,
Respondent.
[OFFICIAL ENGLISH TRANSLATION]
REASONS FOR JUDGMENT
Hogan J.
I. Overview [1] Diane Barbeau (the appellant) has brought before the Tax Court of Canada (the TCC) two related appeals from two decisions of the Minister of National Revenue (the Minister) made under section 91 and subsection 93(3) of the Employment Insurance Act[1] (the Act).
[2] Said decisions concern the insurability of work performed by the workers Marc Martineau and Mélanie Hamel (collectively the workers) during 2010 and 2011. The Minister is of the view that the work performed was insurable, whereas the appellant claims the opposite.
[3] The appeals were heard on common evidence on January 23 in Ottawa. The parties subsequently filed written submissions setting out their respective positions.
II. Facts A. Factual background [4] The appellant had been operating a sole proprietorship providing cleaning services under the name Service d’entretien ménager de l’Outaouais (SEMO) since 2002. During the period at issue, the business was largely run by the appellant’s spouse, Yves Grenier. She had at least a dozen workers and approximately 20 clients.
[5] Before starting the business, the appellant worked as a self-employed worker in the cleaning services field. When her contracts became too numerous, she decided to create SEMO in order to assign some contracts to other workers on a commission basis.
[6] The workers whose services were retained by SEMO did not have to find clients. That task belonged solely to the appellant. The evidence shows that she found clients through word of mouth and her Web site. No written contract was signed between SEMO and the clients to whom cleaning services were provided.
[7] When a client requested a service, the appellant paired a worker with that client. The worker could accept or reject the client assigned to him or her. In the case of rejection, and where possible, the appellant tried to provide the worker with another client.
[8] SEMO had a written contract with each of its workers, including the two workers involved in this case. However, according to Mr. Grenier’s testimony, most of the clauses included in the contract were not applied and were not representative of the true relationships between the parties. This fact was corroborated by a number of workers who testified at the hearing.
[9] Prior to entering into a contract, the appellant made sure the workers had the proper skills. To that end, she asked the new workers to clean, for example, a bathroom. According to Mr. Grenier, the appellant did not tell the workers how to do their job, but they would sometimes ask the appellant for advice.
[10] In the beginning, the workers were paid directly by the clients, by cheque. However, around 2008, SEMO created a pre-authorized payment system by which the business collected the money from the clients and then remitted it to the workers using a trust account. That system was established at the request of the clients and the workers so as to facilitate payment for services.
[11] In order to ensure that the change in method of payment did not affect the self-employed status of workers, SEMO consulted an accountant. He advised SEMO to deposit all amounts collected from the clients in a trust account.
[12] Before the workers undertook the cleaning work, the appellant visited the premises to provide a price estimate. The client then authorized payment by direct deposit, based on the estimate provided.
[13] Unless a worker spent more time than expected at a client’s home, the amount taken by SEMO corresponded to the original estimate. However, the workers could, where necessary, modify the hours for which they were to be paid on the SEMO Web site. Permission by SEMO was not required to do so.
[14] SEMO took the pre-authorized amounts and placed them in the trust account the same day on which the service was provided. Exceptions aside, the workers received the amounts owing weekly. According to Mr. Grenier, the payments were made once per week to save on bank transfer fees.
[15] SEMO collected a $3 or $4 per hour[2] commission on the amounts charged and provided the workers with an invoice for that amount.
[16] Throughout the periods at issue, the workers were married. They had been performing cleaning services for SEMO since September 2010 until July (in the case of Mr. Martineau) and September (in the case of Ms. Hamel) 2011.[3]
[17] The workers began their relationships with SEMO after they answered an ad on the Emploi Québec Web site. There was a first meeting, and then a second meeting at the appellant’s residence, where she asked the workers to clean a room to confirm their skills.
[18] The workers each signed a contract with SEMO. The agreement provided, inter alia, that the workers could only provide their services to SEMO, that they had to work a minimum of 30 hours per week, and that they had to comply with the company’s code of ethics. The contract referred to the workers as self‑employed workers. In the cases of Mr. Martineau, Mr. Grenier stated that he had asked him to sign a contract just so that his clients would not be stolen from him.
[19] The workers worked together, save exceptions. According to Ms. Hamel, they operated as a [Translation] “partnership.” Mr. Grenier also saw the workers that way. He explained in his testimony that the maintenance contracts were only granted to Ms. Hamel and that she decided whether she wanted to undertake the cleaning duties on her own or with the help of her spouse.
[20] The amounts paid by SEMO to the workers were deposited in their joint account. On her tax returns for the 2010 and 2011 taxation years, Ms. Hamel reported all the amounts received from SEMO as business income and claimed the deduction of an expense for the portion paid to Mr. Martineau.
[21] SEMO ceased operations in September 2013. The workers who performed services for SEMO continued to serve the same clients. The only difference was the manner in which they were paid. Indeed, the workers were now paid by cheque directly from the client, as had been the case before the pre-authorized payment system was put in place.
B. The Minister’s decision [22] Following the termination of their employment, the workers applied to the Department of Human Resources and Skills Development Canada (HRSDC) for employment insurance benefits. Before accepting their application, HRSDC asked the Minister to rule on the insurability of the work performed by the workers during the duration of their contracts.
[23] On review, the Minister determined that the workers were not employees, but that they were nonetheless engaged in insurable employment pursuant to paragraph 5(1)(d) of the Act and paragraph 6(g) of the Employment Insurance Regulations[4] (the Regulations):
[Translation]
[2012-4560(EI)]
Based on our analysis, we have ruled that during the period at issue, Marc Martineau was not an employee. Furthermore, we have established that as a placement or employment agency, you placed him in that employment and paid him to perform services for and under the direction and control of your clients.
Accordingly, his employment was insurable under paragraph 5(1)(d) of the Employment Insurance Act as the conditions of paragraph 6(g) of the Employment Insurance Regulations were all met.
[2013-2811(EI)]
Based on our analysis, we have ruled that during the period at issue, MÉLANIE HAMEL was not an employee. Furthermore, we have established that as a placement or employment agency, you placed her in that employment and paid her to perform services for and under the direction and control of your clients.
Accordingly, her employment was insurable under paragraph 5(1)(d) of the Employment Insurance Act as the conditions of paragraph 6(g) of the Employment Insurance Regulations were all met.
[Emphasis added.]
[24] The Canada Revenue Agency (the CRA) subsequently issued a T4 Slip solely in Ms. Hamel’s name for the 2010 and 2011 taxation years.
[25] The appellant appealed that decision to no avail. Upon reconsideration, the decision was confirmed by the Minister:
[Translation]
[2012-4560(EI)]
Based on an impartial review of all the information relating to this appeal, it was found that this employment was insurable. [Marc Martineau] was placed in employment by Diane Barbeau to perform services for and under the direction and control of a client of Diane Barbeau and that worker was remunerated by Diane Barbeau for the performance of those services. Accordingly, this employment was included in insurable employment.
[2013-2811(EI)]
Based on an impartial review of all the information relating to this appeal, it was found that this employment was insurable. Although [Mélanie Hamel] was not engaged in insurable employment under a contract of service with you, said worker was placed in employment by you to perform services for and under the direction and control of your client, and said worker was remunerated by you for the performance of those services. Accordingly, this employment was included in insurable employment.
[Emphasis added.]
[26] Following this setback, the appellant appealed to this Court.
III. Issues [27] The issues raised at the hearing, and under consideration in these Reasons, are as follows:
1. Can paragraph 6(g) of the Regulations apply if it is determined that the workers were self-employed workers?
2. If the answer is no, can the Minister advance an alternative argument that was not set out in the decision he made pursuant to subsection 93(3) of the Act? If the answer is yes, who has the burden of proof?
3. If the Minister can advance such an argument, were the workers engaged in insurable employment with the appellant during the relevant periods under paragraph 5(1)(a) of the Act?
IV. Application of paragraph 6(g) to self-employed workers A. Is paragraph 6(g) of the Regulations applicable to self-employed workers? Applicable law The meaning of “employment” [28] Paragraph 6(g) of the Regulations provides that the work performed by a person who performs services through a placement or employment agency is insurable where that person is paid by the agency and performs services under the control of the client:
6 Employment in any of the following employments, unless it is excluded from insurable employment by any provision of these Regulations, is included in insurable employment:
. . .
(g) employment of a person who is placed in that employment by a placement or employment agency to perform services for and under the direction and control of a client of the agency, where that person is remunerated by the agency for the performance of those services.
[Emphasis added.]
[29] Under the circumstances provided for in paragraph 6(g), the placement or employment agency shall be deemed to be the employer of the worker for the purposes of deducting and remitting the employment insurance premiums, pursuant to section 7 of the Insurable Earnings and Collection of Premiums Regulations:[5]
7 Where a person is placed in insurable employment by a placement or employment agency under an arrangement whereby the earnings of the person are paid by the agency, the agency shall, for the purposes of maintaining records, calculating the person’s insurable earnings and paying, deducting and remitting the premiums payable on those insurable earnings under the Act and these Regulations, be deemed to be the employer of the person.
[30] Paragraph 6(g) of the Regulations is a provision enacted under paragraphs 5(1)(d) and 5(4)(c) of the Act:
5(1) Subject to subsection (2), insurable employment is
. . .
(d) employment included by regulations made under subsection (4) or (5);
. . .
(4) The Commission may, with the approval of the Governor in Council, make regulations for including in insurable employment
. . .
(c) employment that is not employment under a contract of service if it appears to the Commission that the terms and conditions of service of, and the nature of the work performed by, persons employed in that employment are similar to the terms and conditions of service of, and the nature of the work performed by, persons employed under a contract of service;
[Emphasis added.]
[31] The insurable employment described in subsection 5(1) is, broadly speaking, employment held by persons bound by a contract of employment. Subsection 5(4), however, is an exception to this rule. Indeed, it broadens the scope of subsection 5(1) by extending the Employment Insurance program to include activities governed otherwise than by “contract of service.” Accordingly, regulations made under subsection 5(4) may include activities performed by persons other than employees, including self-employed workers.
[32] The Federal Court of Appeal (the FCA) accepted this view in Sheridan v. Canada,[6] in which the applicant was found liable for unemployment insurance premiums under the authority of the predecessor to paragraph 6(g) of the Regulations (paragraph 12(g)[7] of the Unemployment Insurance Regulations).
[33] In that case, the applicant carried on the business of a placement agency for nurses that provided nursing services to various hospitals and nursing facilities in the Toronto area. The nurses were subject to the control of the particular hospital when they reported to that hospital, but there was no employment contract between the nurses and the hospitals or the placement agency. The nurses were self-employed workers.
[34] The applicant claimed that paragraph 12(g) of the Unemployment Insurance Regulations could not be applied in the circumstances because its enabling provision, paragraph 4(1)(c)[8] of the Unemployment Insurance Act, 1971 (the predecessor of paragraph 5(4)(c) of the Act), was not directed at self-employed workers.
[35] Justice Heald dismissed that argument, being of the opinion that paragraph 4(1)(c) of the Unemployment Insurance Act, 1971 could be directed at self‑employed workers:[9]
. . . Subsection 4(1)(c) applies only to those persons employed in employment not under a contract of service (including self-employed persons) in circumstances where they perform a similar type of work and under similar terms and conditions to those persons who are employed under a contract of service. In contrast, subsection 4(2) covers the wider category of persons who, while being employed, not under a contract of service (including self-employed persons) are employed where the nature of the work and the terms and conditions of that work need not be similar to the terms and conditions and nature of work of employment under a contract of service. . . .
[Emphasis added.]
[36] Thus, he determined that paragraph 12(g) applied to this group of workers.
[37] Justice Heald based his conclusion, inter alia, to the decisions of the Supreme Court of Canada in The Queen v. Scheer Ltd.[10] and Martin Service Station Ltd. v. M.N.R.,[11] in which it was found that the word “employment” in paragraph 26(1)(d)[12] of the Unemployment Insurance Act (predecessor of paragraph 5(4)(c) of the Act) should be interpreted to include “a business, trade or occupation and not solely to designate a master and servant relationship.”[13]
[38] Since Sheridan, it has been decided that the word “employment” in section 6 of the Regulations must be interpreted to include a business, trade or occupation, as noted by Deputy Judge Weisman in Carver PA Corporation v. M.N.R.:[14]
11 It is trite law that the term “employment” in Regulation 6(g) under the Act includes a business, trade or occupation and does not solely designate a master and servant relationship. It does not matter whether the worker involved is an employee or an independent contractor. Both are included in insurable employment by this Regulation. . . .
[Emphasis added.]
B. Is the appellant liable for employment insurance premiums? Applicable law [39] For paragraph 6(g) of the Regulations to apply, the following criteria must be met: (i) there must be a placement or employment agency; (ii) a person must be placed in employment by a placement or employment agency to perform services for a client; (iii) the person must be under the direction and control of a client of the agency; and (iv) the person must be remunerated by the agency:
6 Employment in any of the following employments, unless it is excluded from insurable employment by any provision of these Regulations, is included in insurable employment
. . .
(g) employment of a person who is placed in that employment by a placement or employment agency to perform services for and under the direction and control of a client of the agency, where that person is remunerated by the agency for the performance of those services.
[40] There is no definition of “placement or employment agency” in the Act or the Regulations. However, the Canada Pension Plan Regulations[15] provides a definition in subsection 34(2):
34(1) Where any individual is placed by a placement or employment agency in employment with or for performance of services for a client of the agency and the terms or conditions on which the employment or services are performed and the remuneration thereof is paid constitute a contract of service or are analogous to a contract of service, the employment or performance of services is included in pensionable employment and the agency or the client, whichever pays the remuneration to the individual, shall, for the purposes of maintaining records and filing returns and paying, deducting and remitting contributions payable by and in respect of the individual under the Act and these Regulations, be deemed to be the employer of the individual.
(2) For the purposes of subsection (1), “placement or employment agency” includes any person or organization that is engaged in the business of placing individuals in employment or for performance of services or of securing employment for individuals for a fee, reward or other remuneration.
[Emphasis added.]
[41] Considering the similarity between subsection 34(1) and paragraph 6(g) of the Regulations, some judges of the TCC saw fit to apply the definition reproduced above for the purposes of paragraph 6(g):[16]
15 I prefer to apply the definition found in the Plan to appeals under the Act because the cases cited above disregard the definition contained in subsection 34.(2) of the Plan. This provision must surely be applicable to cases decided under subsection 34.(1) of the Plan. If that is so, it follows that the same definition should be applied equally in proceedings under the Act to achieve as much consistency as possible between two provisions intended to address the same situation.
[Emphasis added.]
[42] Other judges, however, opted for a more flexible solution. In the absence of a definition, they claim that the expression “placement or employment agency” must be given its ordinary meaning read in context. Thus, a placement or employment agency, for the purposes of paragraph 6(g), must be considered “an organization engaged in matching requests for work with requests for workers.”[17]
[43] According to that definition, it is not necessary that a placement or employment agency have a particular type of arrangement for remuneration, contrary to subsection 34(2) of the Canada Pension Plan Regulations:[18]
14 . . . It was argued as well that the appellant differed from a normal employment or placement agency in respect of the arrangement as to fees. In my view, nothing in the language of regulation 12(g) ties the meaning of the term "placement agency" to the presence or absence of any particular type of arrangement for the remuneration of the agency as suggested at one point by counsel for the Appellant.
[44] I note that, thus far, the definition to be given to the expression “placement or employment agency” in paragraph 6(g) of the Regulations has not been definitively addressed by the FCA.
[45] However, in OLTCPI Inc. v. Canada,[19] the FCA agreed to analyze the appellant’s status based on the definition provided in subsection 34(2) of the Canada Pension Plan Regulations, in part because this was the approach that the Tax Court judge took, and because the appellant never took issue with his approach:
27 Turning to the first issue, the relevant provisions of the EI Regulations and the CPP Regulations, which are relevant to the disposition of the appeals, are similar but not identical. For one thing, the term “placement agency” is defined in the CPP Regulations (subsection 34(2)) but not in the EI Regulations. The Tax Court Judge nevertheless applied this definition for EI purposes as well, an approach with which the appellant does not take issue.
[Emphasis added.]
[46] Justice Noël stated that, in order to determine whether a person is a placement agency within the meaning of subsection 34(2), the question is whether the person concerned is merely supplying workers or is doing so in the course of providing a distinct service:[20]
30 In so saying, Porter D.J. was addressing the difficulty in insuring that the placement agency provisions not apply to persons, such as a subcontractor, providing services which require that workers attend to the premises of the client and perform functions, sometimes at the direction of the client. The question in this regard is whether the person concerned is merely supplying workers or is doing so in the course of providing a distinct service.
[Emphasis added.]
[47] The test formulated by Justice Noël is a restatement of the words of Deputy Judge Porter of the TCC in Supreme Tractor Services Ltd. v. Canada,[21] in which he explained in more detail the distinction between merely supplying workers and providing a distinct service:
12 Thus, the first question to be asked is whether the worker is performing services for entity A as part of the business of the latter, albeit part of that business may be a contract for entity A to provide a service for entity B, or whether entity A is simply acquiring personnel as its very business with no contract to undertake anything further than to pass the worker on to entity B to undertake whatever the business of entity B might be. The simple question to ask is whether entity A is under any obligation to provide a service to entity B other than simply provide personnel. Is it obligated to perform in some other way than simply to make people available? If the answer is yes, it clearly has business of its own as does any general contractor on a building site and the worker is not covered by the Regulations under either statute. If however, the answer is no, that is, it is not obligated to carry out any service other than to provide personnel, then clearly the worker in such a situation is covered by the Regulations under both statutes.
13 The question as I see it is not so much about who is the ultimate recipient of the work or services provided as this will cover every single possible subcontract situation, but rather who is under obligation to provide the service. If the entity alleged to be the placement agency is under an obligation to provide a service over and above the provision of personnel, it is not placing people, but rather performing that service and is not covered by the Regulations.
14 I refer to the Federal Court of Appeal case of Vulcain Alarme Inc. v. The Minister of National Revenue, (1999) 249 N.R. 1 for an analogy, where the same principle is clearly set out in relation to whether a subcontractor becomes an employee in certain situations. Létourneau, J.A. said this:
A contractor who, for example, works on site on a subcontract does not serve his customers but those of the payer, that is the general contractor who has retained his services. The fact that Mr. Blouin had to report to the plaintiff's premises once a month to get his service sheets and so to learn the list of customers requiring service, and consequently the places where his services would be provided, does not make him an employee. A contractor performing work for a business has to know the places where services are required and their frequency just as an employee does under a contract of employment. Priority in performance of the work required of a worker is not the apanage of a contract of employment. Contractors or subcontractors are also often approached by various influential customers who force them to set priorities in providing their services or to comply with the customers' requirements.
15 The simple facts that sub-contractors contracting with entity A are required to comply with the requirements of entity B does not per se place those persons under the direction and control of entity B any more than it makes entity B a customer of those persons.
[Emphasis added.]
[48] According to the principles established by Deputy Judge Porter—and by extension the FCA—in order for SEMO to be considered a placement or employment agency, it is not necessary for the workers to have performed services for SEMO as part of the business of the latter, but rather it is necessary that the workers performed services by working on their own account and that the appellant’s only obligation was to place personnel.
[49] In my opinion, the appellant meets this requirement.
[50] The evidence shows that the only service provided by the appellant was that of finding contracts for the workers and paying the remuneration paid by the clients in trust for the workers.
[51] The second criterion in paragraph 6(g) is not contentious as the parties agree that the clients served by the workers were those of SEMO. This conclusion is also supported by the evidence.
[52] In his written submissions, the Minister, without further explanation, stated that the workers were under the direction and control of the clients as it [Translation] ‟is clear from the evidence that the clients could tell the [w]orkers what to do even if they did not necessarily tell them how to do it.ˮ[22]
[53] In my opinion, the evidence did not support this conclusion.
[54] The workers often cleaned the clients’ houses jointly, but the clients did not decide what task would be done by Mr. Martineau or Ms. Hamel or how to do it.[23]
[55] The workers each testified that the clients were rarely present when they performed their work.[24] Ms. Hamel stated that the clients did not give her orders because they trusted her and because she knew what to do.[25]
[56] In 2010 and 2011, the workers provided cleaning services for Geneviève Horlings, a client of SEMO. Ms. Horlings was not present when the workers came to do the cleaning.[26] Before the Court, she stated that she initially met with Ms. Hamel to show her the house, but she did not tell her how to do her job.[27] According to Ms. Horlings, she did not have to give orders because [Translation] ‟they are the professionals.ˮ[28] Ms. Horlings knew that Ms. Hamel worked with Mr. Martineau, but admitted that she never met or spoke with him.[29]
[57] The relationship between the workers and Ms. Horlings was not unique. According to the testimonies heard at the hearing, there was generally a lack of control by the clients over the SEMO workers.
[58] For example, Bryan Goulet, a worker, testified that he never received orders from a client on his work methods.[30] He also stated that he could refuse if clients asked him to perform additional tasks.[31] In my opinion, this type of refusal is a strong indication of the lack of control by the clients over the workers.
[59] Jean-Marc Aubry, a client, testified that he did not tell the workers how to do their work.[32]
[60] In his written submissions, the Minister restated the comments by Deputy Judge Weisman in Care Nursing Agency Ltd. v. M.N.R.[33] to say that, in the case of highly skilled workers, direction and control can be established when a client explains to the worker what to do, but without telling him or her how to do it.
[61] The Minister is right in saying that control over a qualified worker can be exercised by the person giving out work, even though that control is less strict than in the case of a layperson. Deputy Judge Weisman, however, did not address the issue of control by relying on this ground alone. On the contrary, the facts of the case showed, for example, that the nurses “were bound to comply with the hospital’s safety procedures and rules.” In my opinion, that obligation is a strong indication of control.
[62] There is no indication that a similar situation existed in the case at bar. The clients had, of course, a say about the rooms in the house that had to be cleaned[34] and the quality of work to be performed, but that should not be interpreted as an indication of control. In Le Livreur Plus Inc. v. Canada,[35] the FCA clearly stated its approval of such a viewpoint:
19 Having said that, in terms of control the Court should not confuse control over the result or quality of the work with control over its performance by the worker responsible for doing it: Vulcain Alarme Inc. v. The Minister of National Revenue, A-376-98, May 11, 1999, paragraph 10, (F.C.A.); D&J Driveway Inc. v. The Minister of National Revenue, supra, at paragraph 9. As our colleague Décary J.A. said in Charbonneau v. Canada (Minister of National Revenue - M.N.R.), supra, followed in Jaillet v. Canada (Minister of National Revenue - M.N.R.), 2002 FCA 394, “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”.
20 I agree with the applicant's arguments. 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.
[Emphasis added.]
[63] Thus, based on the facts presented, I cannot conclude that the workers were under the direction and control of the clients they served.
[64] According to the Minister, the payments issued to the workers by SEMO shows that the works were in fact remunerated by SEMO.[36] The appellant insists, however, that the remuneration paid to the workers came from the clients, and that SEMO merely acted as a conduit.[37]
[65] In my opinion, the Minister is correct on that point.
[66] In examination-in-chief, Mr. Grenier explained that during the first years of SEMO the clients paid the workers directly by cheque or in cash.[38]
[67] Around 2008, however, the clients and the workers expressed an interest in the implementation of a pre-authorized payment system.[39] Realizing that such an arrangement could have an impact on the status of the workers, the appellant consulted an accountant for advice. To ensure that the workers were not considered employees, the accountant advised opening a trust account for the collection of payments from the clients’ bank accounts and their issuance to workers.[40] This was how SEMO would operate from now on.
[68] This way of doing things was very well received by the workers. Worker Jocelyne Dinel, for instance, testified that the pre-authorized payment system facilitated the recovery of her income and saved her from chasing after clients to get paid, as was the case before she joined SEMO.[41]
[69] The workers recorded their hours worked on the SEMO Web site at the end of each day. SEMO took the amounts to be paid from the clients’ banks accounts and deposited them in the trust account. Those amounts, less the commission required by SEMO, were then paid to the workers, once per week, by bank transfer in their joint account.[42] Ms. Hamel acknowledged that two or three clients paid by cheque, but contrary to what went on in the case of certain other workers,[43] the cheques were not remitted to her directly.[44]
[70] By putting in place the pre-authorized payment system, Mr. Grenier wanted to ensure that the appellant preserved the features of the old method of payment by which the clients remunerated the workers.[45]
[71] In support of his contention in this regard, he pointed out that SEMO had the clients sign a document which confirmed that the payments accepted by SEMO were for the workers and that SEMO merely acted as a conduit.[46]
[72] However, the payment acceptance forms were signed after the CRA began its tax audit of the appellant’s company in 2012. The workers were no longer providing their services to SEMO at the time. The evidence presented by the appellant is self-serving, established after the fact. Accordingly, I find that it is not probative.
[73] Nor is the case law is in the appellant’s favour.
[74] In Sheridan, supra, the placement or employment agency received the pay earned by the nurses from the hospitals and remitted to the nurses the pay, less the agency’s fee. Counsel for the applicant in that case argued that the agency acted as a conduit, and therefore, did not remunerate the nurses. Justice Heald dismissed that argument. According to him, a mere conduit would have transmitted the remuneration in toto, without deducting the fee, and would not have fixed the quantum of the remuneration:[47]
The only other submission of the applicant which should be addressed is to the effect that Regulation 12(g) does not apply here because the nurses placed by the applicant were not “remunerated” by the agency as the regulation requires. Counsel submitted that, on these facts, the applicant was merely a conduit of the remuneration paid by the hospitals. I do not agree with this view of the matter. As stated supra, the applicant here received all of the pay earned by the nurses from the hospitals. Thereafter she remitted to the individual nurses the proper amount earned by each after deducting from that amount, her fee of 10% in most cases. The Shorter Oxford Dictionary (3rd Ed.) defines “remunerate” and “remuneration” as follows:
1. trans. to repay, requite, make some return for (services etc.)
2. to reward (a person); to pay (a person) for services rendered or work done...
Hence remuneration, reward, recompense, repayment, payment, pay.
Volume 4 of Stroud's Judicial Dictionary (4th Ed.) states inter alia, that “remuneration” a quid pro quo [Page 2324 - the authority for this definition is said to be the judgment of Blackburn J. in R. v. Postmaster General 1 Q.B.D. 663, 664.].
Based on the above definitions and ascribing to “remunerate” its plain ordinary meaning, I conclude that this applicant “remunerated” the nurses. She was not a mere conduit. She remitted to the nurses the amount they earned for their services which amount was dependent on their rate of pay which was determined, not by the hospitals but by the applicant. However, in 90% of the cases the remittal was not for the total amount earned since the applicant's 10% fee was deducted therefrom. In the remaining 10% of the cases, the full amount earned was remitted to the individual nurses but subject to a verbal promise by those nurses to pay the applicant's 10% fee. In any event, the applicant could not be said to be a mere conduit, whether her 10% fee was deducted before remittance or became the subject of a debt owing to her by the nurses in question. If her role was that of a mere conduit, she would simply have transmitted the remuneration in toto. I think also that a mere conduit would not have been involved in fixing the quantum of the remuneration. I therefore reject this submission by counsel for the applicant.
[Emphasis added.]
[75] Thus, I must conclude that the appellant in this case remunerated the workers within the meaning of paragraph 6(g) of the Regulations.
[76] Since the third criterion was not met, paragraph 6(g) of the Regulations cannot apply in this case.
V. The Minister’s alternative argument [77] The Minister submits as an alternative argument that the employment of the workers is insurable under paragraph 5(1)(a) of the Act. This provision provides that insurable employment is employment by an employer under an express or implied contract of employment, written or oral.
[78] The appellant’s appeals are based on an insurability decision by the Minister. They are not based on an assessment. Thus, the question that arises is whether the Minister can make an alternative argument in these appeals.
A. Can the Minister make an alternative argument? [79] When a person is the subject of a decision by the Minister concerning the insurability of his or her employment, he or she may, if he or she wishes, to appeal to the TCC under subsection 103(1) of the Act.
[80] The TCC may then vacate, confirm or vary that decision, pursuant to subsection 103(3) of the Act:
103(3) On an appeal, the Tax Court of Canada
(a) may vacate, confirm or vary a decision on an appeal under section 91 or an assessment that is the subject of an appeal under section 92;
(b) in the case of an appeal under section 92, may refer the matter back to the Minister for reconsideration and reassessment;
(c) shall notify in writing the parties to the appeal of its decision; and
(d) give reasons for its decision but, except where the Court deems it advisable in a particular case to give reasons in writing, the reasons given by it need not be in writing.
[Emphasis added.]
[81] Section 104 of the Act grants the TCC broad power to decide a case. Indeed, subsection 104(1) provides that the Court may decide any question of fact or law