Becher v. M.N.R.

Becher v. M.N.R.
Court (s) Database
Tax Court of Canada Judgments
Date
2003-06-07
Neutral citation
2003 TCC 373
File numbers
2002-685(EI)
Judges and Taxing Officers
Dwayne W. Rowe
Subjects
Canada Pension Plan
Decision Content
Docket: 2002-685(EI)
BETWEEN:
CHRISTINE BECHER,
Appellant,
and
THE MINISTER OF NATIONAL REVENUE,
Respondent,
and
VICTORIA MICROSYSTEMS LTD.,
Intervenor.
____________________________________________________________________
Appeal heard on common evidence with the appeals of Christine Becher (2002-686(CPP)) and Victoria Microsystems Ltd. (2002-687(EI) and 2002-688(CPP)) on February 3, 2002 at Victoria, British Columbia
Before: The Honourable Deputy Judge D.W. Rowe
Appearances:
Counsel for the Appellant:
George F. Jones
Counsel for the Respondent:
Amy Francis
Counsel for the Intervenor:
George F. Jones
____________________________________________________________________
JUDGMENT
The appeal is dismissed and the decision of the Minister is confirmed in accordance with the attached Reasons for Judgment.
Signed at Victoria, British Columbia, this 7th day of June 2003.
"D.W. Rowe"
D.J.T.C.C.
Citation: 2003TCC373
Date:20030607
Dockets: 2002-685(EI)
2002-686(CPP)
BETWEEN:
CHRISTINE BECHER,
Appellant,
and
THE MINISTER OF NATIONAL REVENUE,
Respondent,
and
VICTORIA MICROSYSTEMS LTD.,
Intervenor,
AND
2002-687(EI)
2002-688(CPP)
VICTORIA MICROSYSTEMS LTD.,
Appellant,
and
THE MINISTER OF NATIONAL REVENUE,
Respondent,
and
CHRISTINE BECHER,
Intervenor.
REASONS FOR JUDGMENT
Rowe, D.J.T.C.C.
[1] The appellant - Christine Becher (Becher) - appealed from two decisions issued by the Minister of National Revenue (the "Minister") on January 18, 2002 wherein assessments - dated November 14, 2000 and November 15, 2000 - issued to Victoria Microsystems Ltd. (VML) for Canada pension plan (CPP) contributions and employment insurance (EI) premiums in respect of certain workers - including Becher - were confirmed on the basis Becher had been placed in employment by VML to perform services for and under the direction and control of a client of VML and was remunerated - by VML - for performance of those services. The decision of the Minister was issued pursuant to subsection 27.2(3) of the Canada Pension Plan (the "Plan") and subsection 34(1) of the Canada Pension Plan Regulations (CPP Regulations) and subsection 93(3) of the Employment Insurance Act (the "Act") and section 6(g) of the Employment Insurance Regulations (EI Regulations).
[2] The appellant - VML - appealed from two decisions issued by the Minister on January 18, 2002 confirming - inter alia - certain amounts due pursuant to assessments dated November 14, 2000 and November 15, 2000, arising from the failure to pay CPP contributions and EI premiums in respect of certain named workers for either the 1998 or 1999 taxation year or - in the case of some workers - for both years.
[3] Counsel for both appellants/intervenors and counsel for the respondent agreed all appeals would be heard on the basis of common evidence.
[4] David Carl testified he is a businessman residing in Victoria, British Columbia. In 1965, he started a computer business in Victoria. He incorporated VML - in 1975 - in order to carry on business with the appellant Becher who - at that time - was his wife. They were equal shareholders and both were directors of the corporation. VML entered into contracts with entities carrying on business in the private sector. In 1989, Carl and Becher separated and - since 1995 - Carl has been the sole shareholder and director of VML. In 1998 and 1999 Becher provided services to VML under the name CB Enterprises. In 1998 and/or 1999, Frank Trice and Susan Trice worked as technical writers. During this period, VML had contracts with Insurance Corporation of British Columbia (ICBC), Synertech Systems Corporation (Synertech) of Vancouver, British Columbia and Cardinal Systems Group Ltd. (Cardinal) operating in Victoria. VML provided technical writing services to its clients by entering into contracts with certain individuals to perform those specialized tasks. Carl stated 1998 and 1999 were boom years for VML because of fears arising from the phenomenon known as Y2K in which all sorts of dire predictions had been issued in relation to the impending arrival of January 1, 2000, a rollover date particularly significant within the computer industry. As a result of the demand, VML turned to retaining the services of independent contractors. In 2000, business dropped dramatically and following the assessments issued by Canada Customs and Revenue Agency (CCRA) - formerly Revenue Canada - Carl stated workers were reluctant to provide services to VML and the corporation is now insolvent and no longer carries on business. Carl had provided CCRA with a list of cheques paid to workers and supplied other details as requested. He received a letter - Exhibit A-1 - dated October 17, 2000, from Gord Hawes at CCRA Verification and Enforcement Division advising a review had established that no employer/employee relationship existed between VML and certain workers - including Becher - but CCRA had determined those workers - even though independent contractors - had been placed into work situations under circumstances consistent with VML having been a placement agency. As a result, CCRA requested payment of funds in respect of CPP contributions and EI premiums pertaining to named workers in accordance with calculations set forth on the two sheets attached to said letter. Carl referred to an Agreement for Services - Exhibit A-2 - dated January 31, 1997 - entered into between VML and ICBC in which VML agreed to provide certain support services as outlined in appendices A to E, inclusive attached to said agreement. Christine Becher and Randy Prime were retained by VML to provide those services. Carl also referred to another contract - Exhibit A-3 - dated April 7, 1999 - between VML and Cardinal pursuant to which VML agreed to provide certain services until March 31, 2000. Pursuant to an agreement set forth in the form of a letter - Exhibit A-4 - dated April 8, 1996 - VML and Synertech defined all aspects of their business relationship as it pertained to the requirements of a contract between Synertech and the Ministry of Health of the Province of British Columbia. In accordance with the agreement between VML and Synertech, VML agreed to offer the services of Imer Shahini - as a contractor - on the basis he would work under the general direction of the Pharmacare Systems Manager, an employee of the provincial government. Carl also referred to a bundle of 7 documents - Exhibit A-5 - containing pages headed: Agreement for Support Services concerning matters such as rates, terms and personnel assigned, scope of work, list of items to be delivered, completion criteria and expenses. The commencement date was December 16, 1997 and the work was to be completed by Randy Prime and Christine Becher on June 30, 1998. An employee of ICBC - Sam van der Merwe - was named as Project Manager and was responsible for liaison with VML. Carl stated VML had not entered into any written contracts with any of its subcontractors. The services provided to ICBC - initially by Randy Prime and later by Becher - related to organizing material for manuals and expanded into the area of testing and training of ICBC employees. Carl stated he did not supervise Becher's work and commented that throughout their multi-faceted relationship he had never been able to exercise any control over her. Becher had a background as a technical writer and in testing computer programs. During her time as co-owner of VML, Becher had managed the Technical Writing side of the business and was a capable practitioner of the art of translating technical "geek-speak" into comprehensible English for the benefit of end users of a particular program. Carl stated VML had access to a pool of highly-skilled individuals who could be called upon - on relatively short notice - to assist on a project and to provide technical writing services for different groups of users at varying levels of sophistication in using computer programs. Carl stated he located Frank Trice and Susan Trice through the Technical Writers Association and contacted Susan Trice in order to obtain her services for the Pharmacare project. Later, Frank Trice joined her and they continued to provide the requisite technical writing services pursuant to what Carl understood to be an informal job-sharing arrangement. Carl stated he met Richard Bird when Bird was employed at British Columbia Systems Corporation (BCSC). Bird left his employment and entered into an agreement with VML to provide his services to Synertech. Carl stated he began receiving complaints concerning Bird's work pattern which was based strictly on a 7-hour day. Carl terminated Bird's services and assumed the duties formerly carried out by him for the benefit of Synertech in connection with a project for the Ministry of Health (Ministry), the end user. Carl stated Randy Prime had been a school teacher in Ontario but moved to Victoria and began working - as an employee - for VML for approximately one year. Prime left VML and worked as a trainer for another company for about 10 years but returned to VML and provided his services thereafter as an independent contractor. Prime operated a proprietorship - Prime Consulting - and worked on some projects but Carl decided Prime was not suitable for the ICBC project. Carl stated Michael Haas was a student at Camosun College and had been participating in a co-op work program in which he worked - as an employee - for VML concerning a project for BC Online, an agency of the provincial government. Haas had to return to regular classes at Camosun before the work was completed but agreed to finish his task provided VML paid him a higher hourly rate on the basis he would be an independent contractor. Carl agreed to the arrangement and Haas completed the project over the course of three weeks and was paid approximately $3,000 in fees. Carl stated he met Imer Shahini when Shahini was delivering pizza. Shahini was a refugee from Kosovo and had some computer skills so Carl arranged for him to work - at Synertech - on the Pharmacare project for the Ministry. Later, Carl stated Shahini informed him that he wanted to work for entities other than VML. Carl stated he became aware Cardinal had been assessed by CCRA on the basis it was a placement agency. However, in his opinion, he regarded VML as a service provider that billed for work done on the basis of time spent and materials expended. The workers involved in the ICBC project submitted a timesheet to ICBC - with a copy to VML - and this document was used as the basis of payment to the workers. Counsel referred Carl to the assumptions of fact set forth at paragraph 7 of the Reply to the Notice of Appeal (Reply) filed in the VML appeal. Carl accepted the following assumptions of fact:
(a) the Appellant operates a business of providing computer consulting services to governments and various other clients (the "Clients");
(b) the Appellant enters into contracts with the Clients on the basis of providing them with a Worker who has the expertise required by the Client;
(c) the Client must approve of the Worker selected to fulfill the terms of the Appellant's contract with the Client;
(d) the Clients pay the Appellant for the services provided by the Workers as set out in the contracts;
[5] With respect to the assumption - subparagraph 7(e) - that workers charged Goods and Services Tax (GST) to VML, Carl stated this procedure was followed only if clients were within the private sector as opposed to provincial ministries or agencies. The Minister - at subparagraph 7(f) - assumed VML paid a worker - at an hourly rate - upon receipt of an invoice. Carl stated the work was remunerated at an hourly rate but the worker was paid only after VML had been paid by the particular client. Carl agreed with the subsequent assumption that workers were permitted to do some work at offices in their own homes even though the majority of work was carried out at the clients' premises but pointed out that clients have security concerns which usually dictate that services are performed entirely within the offices of the client. At subparagraph 7(h), the Minister assumed the clients directed workers as to what work was to be done, the manner by which it was to be performed and the location of the work. Carl stated the clients defined the task but VML provided the expertise necessary to achieve the desired result. Carl commented on the assumption - subparagraph 7(i) - that clients instructed the workers as to the number of hours per day and the days per week they were required to work during the period set out in the relevant contract with VML. Carl stated this assumption was incorrect in that the contracts between VML and clients usually specified a maximum number of hours or days allocated for the completion of the work and, while workers attempted to match the normal business hours observed by a client, there was no contractual obligation to do so. Carl agreed the workers were required to provide their services personally and had to obtain prior approval from a client before bringing in another resource person to work on a specified project. Carl disagreed with the assumption - at subparagraph 7(k) - that VML had any preferred call on the services of the workers and stated that if any worker decided to leave, then he had to find a suitable replacement to provide ongoing services to the client. With regard to the assumption that the workers were directed and controlled by the clients while performing services for the clients - subparagraph 7(n) - Carl stated the clients had some authority over a worker in terms of scheduling and prioritizing work in connection with the establishment of deadlines for receipt of certain work product.
[6] In cross-examination by counsel for the respondent, David Carl agreed that VML provided people - equipped with specialized skills - to undertake specific tasks for others and stated he regarded the appellant corporation as a solution provider by making consultants available to perform technical support services. Carl was referred to a bundle of documents - Exhibit R-1 - and to Appendix A of the contract between VML and ICBC - dated January 31, 1997 - in which Christine Becher is named as the person assigned to perform a specific task - at the billing rate of $62 per hour - 7 hours per day during the 113-day term. Carl agreed that Mark Mauger was named in Appendix B - the following document - as the Project Manager for ICBC. Carl stated his only contact with Mauger was in the context of the invoicing process during which Mauger would approve Becher's time sheet prior to her submitting it to VML for payment. Carl agreed VML had provided certain workers to Synertech and Cardinal in order to work on certain projects but had made workers available to ICBC - directly - without the intervention of another business entity. Carl stated all contracts between VML and its clients specifically named the person(s) who would be performing the work and it was customary for a maximum number of hours to be inserted in the agreement but VML billed on an hourly basis for the work actually performed. Carl explained that a worker's time sheet was used for the purpose of VML invoicing Synertech and - when VML received payment - the worker would be paid the amount due. With regard to the contract between VML and ICBC, Carl agreed the rate of $62 per hour was charged by VML - to ICBC - but Becher was paid - by VML - at a lower rate. Carl agreed that a client was able to control the "big picture" issues arising in the course of a project including the setting of certain targets and could request the presence of a worker at certain meetings. Workers had no ability to hire any replacement workers as that option was the sole prerogative of VML provided, however, it could obtain approval from the client. Carl stated that - at one point - the workers Haas and Shahini had been employees of VML and were paid on a regular basis and provided with computers, Internet access, and had received a guarantee of three months work with the assurance they would be paid for all work done even if the client failed to pay VML. Later, Carl stated Haas and Shahini each provided their own computer and related equipment, paid their own office and related expenses, had no expectation of ongoing work and no guarantee they would be paid in the event of default by a client. When Haas worked on the BC Online project, his work was supervised by a VML employee assigned to that project. During 1998 and 1999, Carl stated VML operated its business with 6 or 7 employees on regular payroll subject to the usual deductions but also relied on subcontractors some of whom operated through a corporation. Carl agreed after VML and Haas had entered into the new arrangement - whereby Haas would no longer be an employee - that Haas carried on in the same manner as before except - as an employee - he had worked from 9:00 a.m. to 5:00 p.m. but - later - had to work around his student schedule and made arrangements for access to the building to accommodate his working hours. When Shahini's relationship with VML was transformed to that of independent contractor - while providing his services to Synertech - the work being performed did not change and time sheets were provided to him for the purpose of billing VML. Shahini had to return the VML computer system he had previously used while working as a VML employee and was required to establish his own in-home office from which location he was free to work additional hours at his own discretion.
[7] In re-examination, David Carl stated he had never contemplated that VML would be regarded as a placement agency in the sense one thinks of those well-known entities that provide personnel on a temporary basis to a variety of clients. Carl stated VML had not entered into any fixed-price contracts for many years because one earlier project had expanded to the point of unprofitability.
[8] Christine Becher testified she is self-employed and is the intervenor in the within appeal by VML and also an appellant in her own right. She provided services to VML and invoiced them on a regular basis - in the name of CBE Consulting Services - which she operated as a sole proprietorship. She referred to a bundle of invoices - Exhibit A-6 - issued by her to VML with regard to work done - and expenses incurred - on the ICBC project in 1999. She started working - in 1998 - on the ICBC project to establish a testing team and that process required a mentor for the designated Team Leader. Becher performed this task, assisted in some Y2K training and also did some teaching. Becher stated the services she provided to ICBC - in 1999 - were mainly in connection with the Radar Photo Project as it was necessary to ensure the application of the software to the requisite task in that certain information had to match photographs of offending vehicles. Becher stated she could not recall any contact whatsoever with Mark Mauger, the individual named by ICBC as the Project Manager for purposes of administering its contract with VML. Instead, she worked with an ICBC employee - Sherry Bennett - who had knowledge of traffic enforcement procedures. Becher maintained regular contact with Carl and would seek his advice from time to time concerning certain technical matters pertaining to a mainframe. With respect to certain assumptions of fact relied on by the Minister - as set forth in paragraph 4 of the Reply applicable to her appeal - Becher stated she did not disagree with those assumptions stated in subparagraphs (a) to (g), inclusive, but added that even though ICBC required her to complete a time sheet and to provide it to a named person, she invoiced VML for her time and certain approved expenses. In addition, she explained that - usually - she was paid within 30 days of submitting her invoice to VML and only performed work at home for clients if she did not require any online access. With respect to the assumption contained in subparagraph 4(h) that the client directed her as to the nature and manner of work to be done, Becher stated ICBC had a general intent concerning the work to be performed but she used her own skills and judgment to carry it out. In order to do so, she had 24-hour access to the ICBC premises and could work hours at her own discretion as long as it did not impair progress on the overall project. Becher disagreed with the following assumption in the Reply that she had been told by the client how many hours per day and how many days per week she was required to work during the contract period. She stated the number of hours worked were important in the sense of comprising a total for purposes of the contract between ICBC and VML but not with respect to when those hours were worked or whether she worked on certain days. She stated there were certain scheduled meetings with ICBC officials that required her attendance. She agreed she was required to perform her services personally but denied that VML had any preferred right to obtain her services, as assumed by the Minister at subparagraph 4(k) of the Reply. During 1998, Becher operated a gardening business which occupied some of her time and - during the summer of 1999 - went to England for 5 months during which period she made some business contacts while visiting her family. Becher stated that, in the course of her professional experience, she regarded a placement agency as an entity that is contacted by an individual seeking assistance in finding work. Becher utilized the business name CBE Consulting Services to provide her services and reported her income to CCRA as self-employment income and was assessed on that basis. She received a letter - Exhibit A-7 - from CCRA - dated March 21, 2001 - concerning her 1999 taxation year in which she was advised she would not be permitted to deduct certain business expenses because CCRA considered she had been an employee of VML and would require certain forms to be provided by that employer in order for her work expenses to be considered eligible for deduction. Becher stated the letter was in error as she had not received a T4 slip from VML.
[9] In cross-examination, Christine Becher stated she met Sherry Bennett and another ICBC employee after she began working on the project. The user acceptance testing was a major requirement for success of the project and Becher stated she devoted her skills to that end in accordance with her own judgment. She had not been part of the process by which the contract had been formed between VML and ICBC and had not been aware of the specific document - Exhibit A-2 - during 1999. While providing her services to the ICBC project, at the request of another contractor engaged in a particular facet of the undertaking, she wrote a test plan which was reviewed by others - including Bennett - who had to be satisfied with the services provided by Becher in her role as a consultant. Becher agreed that the majority of her services were provided to ICBC within the normal business hours of that corporation. In the event she did not want to attend at ICBC premises on a certain day, Becher stated she was not required to seek permission from any ICBC official but - as matter of courtesy - informed certain ICBC employees of her intended absence. Becher stated the overall project underwent a change from a developmental phase to operational status. Becher stated no complaints were made by ICBC about her work but presumed any communication in that regard would have been directed to Carl at VML.
[10] In re-examination, Becher stated that, both before and after the 1998-1999 period, she provided her services to different entities and after leaving VML - in 1995 - had worked on the Pharmacare project as an independent contractor. In 2000, she incorporated her business as CBE Consulting Services Ltd.
[11] Counsel for the respondent called Richard Bird to the witness stand. He testified he is a Senior Systems Analyst and - in 1998 - provided his services - through an arrangement with VML - with regard to a project under the auspices of the Ministry. While working at BCSC, he met David Carl who had been on the premises as an outside consultant. Bird was aware of VML's mainframe consulting business and began having discussions with Carl concerning consulting work and - subsequently - entered into an agreement with VML whereby Bird would provide his services at a certain hourly rate. The work assigned to him - through VML - was in relation to an audit done for the benefit of the Medical Services Plan as it concerned certain billings by physicians and this procedure required a support person to perform certain revisions and updates and to modify the scope of the audit. All services were performed at the premises of the Ministry between 8:00 a.m. and 4:00 p.m., Monday through Friday. An individual - Darcy Ayres - had been provided by Cardinal to exercise a management function with respect to the services being provided to the Ministry and Ayres supervised - as required - work done by Bird. Bird stated he had to attend regular meetings and, although not ordered to perform any specific tasks, was expected to achieve a particular result. In the event he was unable to attend work, he would seek approval from Ayres or the designated employee of the Ministry also involved in the audit process. He reported his time to Ayres and also submitted an invoice to VML. Throughout, Bird stated he was never aware which person or entity had the right to terminate his services.
[12] In cross-examination, Richard Bird stated he had known David Carl for years and Carl had once co-signed a loan for him. Bird stated he had never seen any contract between any entity and the Ministry but understood VML had a contract with Cardinal.
[13] Susan Trice testified she is a self-employed technical writer and had provided her skills to VML from the end of January, 1998 until June 30, 2000. She worked with Synertech in the course of providing services to the Ministry. At the beginning, she had understood that VML had only two months remaining in its contract with Synertech. As a member of the Society for Technical Communications, she had received a call from the secretary to inform her that David Carl of VML was searching for a subcontractor to work on a certain project. Trice stated she contacted Carl and also met Jaime Peschiera of Synertech. She was aware of the broad scope of the work - and the amount thereof remaining - as it related to technical writing and business communications. When undertaking to provide her services for a limited time, she hoped the contract would be renewed by the provincial government. The contract was extended and she reported to different people at Pharmacare - one of whom was another independent contractor - and also to a member of Pharmacare management. There were no regular reporting requirements and communications were carried out on a daily or weekly basis, as required. Various completion targets were established by Division Heads and Managers within Pharmacare. In addition to other duties, Trice wrote and edited Pharmacare newsletters. In her opinion, the project was an undertaking by Pharmacare - a division of the Ministry - and it could set priorities. She had no regular office hours and performed most of her work on the premises but because there were different shifts, she was able to gain access to the building during evenings. She recorded her hours of work and submitted them to Synertech and - as of May 1, 1999 - also to an employee of Pharmacare. After May 1, 1999, Frank Trice shared some of her work and carried out certain tasks. Susan Trice invoiced VML monthly and was paid 30 days later.
[14] In cross-examination, Susan Trice agreed that David Carl had accepted the arrangement whereby Frank Trice would assist her in performing work on the Pharmacare project and the Ministry and Synertech management also approved this new arrangement. She stated she filed her income tax return on the basis of being a self-employed person and CCRA had assessed her accordingly.
[15] Frank Trice testified he is a self-employed technical writer. Between May 1, 1999 and June 30, 2000 - pursuant to an oral contract with David Carl at VML - he provided his services to the Pharmacare project with regard to the production of two manuals required for a new computerized system to be used by pharmacists throughout British Columbia. The contract Susan Trice had been working under had called for the delivery of 1,800 hours of services in a year. Frank Trice stated he had experience in long-term projects and was aware of the particular requirements inherent in such an undertaking. In his view, it was important to "keep the client - Pharmacare - happy". Initially, he had been in contact with Carl. Later, he met with the Operations Manager of the Pharmacare project but had not been introduced to anyone at Synertech. Frank Trice stated he reported - at his own discretion - to the Operations Manager who had the ability to establish priorities in respect of his work. Frank Trice and Susan Trice were partners in an entity called Trice Technical Writing and submitted one invoice to VML in which the hours worked by each of them were set out in detail. For the most part, Frank Trice worked at home but would attend at the Ministry two or three times a week for part of an afternoon when required to meet certain people. He maintained a weekly time sheet and Synertech and the Operations Manager each received a copy. At the end of the month, he issued an invoice to VML in which the hours worked by himself and Susan Trice were billed out at the same hourly rate.
[16] In cross-examination, Frank Trice stated that Synertech and Pharmacare were interested in the end result and not in the details by which it was achieved. He did not consider he was ever at a risk of loss during this period and had reported his income on the basis of being a self-employed individual and had not been reassessed by the Minister.
[17] Counsel for the appellant submitted that in order to determine whether VML is a placement agency, one must take into account the two different standards established by the relevant legislation, namely the Act and the Plan and the respective Regulations thereunder. Employment under section 6(g) of the Regulations under the Act falls into the category of insurable employment provided the worker has been providing services for and under the "direction and control" of the client of the agency where that worker is remunerated by the agency for the performance of those services. Pursuant to the relevant provision of the Regulations under the Plan, a different test is applied in which one must consider whether the services performed by the worker were analogous to a contract of service. Counsel submitted the intent of section 6(g) of the EI Regulations is clear in that the client must control the worker and that aspect thereof would ordinarily include the right to terminate the services being provided by that individual. Counsel referred to the evidence pertaining to several workers named in the assessment - issued under the Act - and pointed out there was very little evidence of control over their work, particularly by the end user/client of their services. Moreover, counsel submitted the Regulations under the Act and/or the Plan were never intended to apply to the sort of circumstances applicable to the within appeals but are directed towards placement or employment agencies which are required to be licensed pursuant to provincial legislation. As an example of the confusion surrounding the entire matter, counsel referred to the finding by the Minister - through CCRA - that Christine Becher had been regarded as an employee for purposes of assessing her income tax return, yet for EI and CPP assessments, the same Minister had decided she was self-employed and not an employee of VML during the relevant period.
[18] Counsel for the respondent conceded the application of section 6(g) of the EI Regulations was the sole basis upon which the Minister decided the named workers were engaged in insurable employment with VML since none of the workers had provided their services to VML pursuant to a contract of service. As a result, the first question to be answered is whether VML is a placement agency. If it is, the next task is to determine whether the workers were under the direction and control of the client for purposes of the EI Regulations and then to analyze the evidence in order to decide whether the workers had provided their services under circumstances which were analogous to a contract of service for purposes of determining whether they were engaged in pensionable employment pursuant to subsection 34(1) of the Regulations under the Plan. Counsel referred to the evidence relating to various workers as it concerned issues of control, approval of work and other relevant factors and submitted it was apparent a great deal of control and direction had been exercised by various clients in respect of the services provided by the relevant worker.
[19] Section 6(g) of the EI Regulations reads as follows:
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 agency 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.
[20] The relevant CPP Regulation is section 34 which reads:
Sec. 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.
[21] In the case of Vendor Surveillance Corp. v. Canada (Minister of National Revenue - M.N.R.), [2000] T.C.J. No. 620 (Vendor), the Honourable Judge Lamarre, T.C.C. considered the appeal of a business that provided its clients with a list of qualified candidates capable of providing certain services to meet their needs within the aerospace industry. The workers were experienced consultants and - as noted by Judge Lamarre at paragraph 7 of her reasons - were "able to provide the appellant's clients with information, suggestions, recommendations and support in ensuring that contractual obligations between a client and the third party suppliers are met in timely fashion, and also in ensuring product quality control". The relevant circumstances in the Vendor case were set out in paragraphs 8 to 12, inclusive of Judge Lamarre's reasons, as follows:
During the period at issue, Mr. Budgen was hired by the appellant as a consultant for the above purposes. An independent contractor's agreement between the appellant and Mr. Budgen was drafted on October 2, 1997. According to the agreement, the appellant wished to have Mr. Budgen available to perform procurement quality control services at times and pursuant to terms agreed upon by the parties. In that document, Mr. Budgen and the appellant mutually agreed that Mr. Budgen's business was independent of that of the appellant and its clients and that any work performed at a client's facility was simply a function of the nature of quality control. Mr. Budgen did not sign that agreement but signed the addendum attached thereto stating the terms of payment and the services to be rendered for the purposes of the project for which Mr. Budgen was retained. According to that addendum, Mr. Budgen was to be paid $17 an hour. Overtime had to be pre-authorized by the client. It was stipulated in the addendum that charges with respect to time and expense were to be submitted to the appellant within a certain time frame so that it could bill the client for them. Without the time sheets, the appellant could not be paid by the client, and neither would Mr. Budgen have been paid by the appellant.
There was, on the other hand, a purchase order signed by the appellant and Northrop. That purchase order authorized the appellant to proceed with the supply of expertise and to assign someone to perform specific work at a specific price. In addition, the purchase order acknowledged that Northrop would pay the appellant for the services provided.
Northrop is an American company and a major airframe subcontractor. Northrop had subcontracted work to, among others, two supplies (Cercast and Héroux), and required the services of Mr. Budgen (through the appellant) at the suppliers' place of business in Montreal in order to monitor, review and analyze the various components of the manufacturing process and the delivery procedures for parts ordered from those suppliers. Mr. Budgen was acting as a quality control inspector.
According to Mr. Budgen's testimony, his main contact with Northrop was Mr. Louis Alfano in New York. He however spoke daily over the telephone with Northrop's project manager in Dallas about Cercast and sent a full written report once a week. With respect to Héroux, he kept in touch with the project manager in Florida on a weekly basis.
Mr. Budgen's role was to keep the client informed as to his input and instructions regarding any changes or adjustments to the suppliers' operations. People from Northrop only came to Montreal three times to visit the suppliers' premises. Mr. Budgen testified that he met those people at the airport and took care of them during their visit. He was not reimbursed his expenses for those services. Mr. Budgen was asked to be present at the suppliers' place of business during the working hours of their employees. Although the working hours started at 6:30 a.m., Mr. Budgen did not arrive before 7:00 or 8:00 o'clock a.m. and left between 4:00 and 5:00 p.m. He worked 40 hours a week, Monday to Friday. Although an office was provided to him at the suppliers' place of business, he did 25 per cent of his work (all the paperwork) at home. Nobody really checked his hours worked and he reported his hours on a time sheet using the honour system.
[22] Judge Lamarre noted that " placement agency" was not defined in the Act and also referred to the definition found at section 34 of the Regulations under the Plan. At paragraphs 19 and 20 of her judgment, she stated:
The next question to be determined is whether Mr. Budgen worked under the direction and control of the appellant's client Northrop. It is not contested here that Mr. Budgen received his remuneraiton from the appellant.
Counsel for the respondent referred to the case of Hennick v. Canada, [1995] F.C.J. No. 294, in which Desjardins J. of the Federal Court of Appeal made the point that what is relevant is not so much the actual exercise of control as the right to exercise control. In Ms. Hennick's particular case, Desjardins J. said that while Ms. Hennick's contract with the payer did not specify how she was to teach, there were parameters she had to meet with regard to time which clearly constituted control.
[23] In the within appeals, all workers were remunerated by VML.
[24] In Computer Action Inc. v. M.N. R., [1990] T.C.J. No. 101, the Honourable Judge Bonner, T.C.C. considered an appeal by a business that had been assessed as a placement or employment agency pursuant to section 12(g) of the Regulations made under the Act. The current provision is section 6(g) but the slight change in wording from its predecessor is not material in respect of any analysis relevant to the within appeals. With respect to the issue whether that appellant was a placement or employment agency, Judge Bonner - at page 5 of his judgment - stated:
Counsel for the Appellant submitted that the Appellant was not a placement or employment agency within the meaning of section 12(g). He argued that the Appellant provided a marketing service for consultants. I do not find the argument persuasive. The term "placement agency" is not defined in the Regulations and must be given its ordinary meaning read in context, VIZ, an organization engaged in matching requests for work with requests for workers. 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.
Next it was argued that the consultants were not remunerated by the Appellant for the performance of their services. I can see no force in that argument. The evidence is clear. The consultants in point of fact invoiced the Appellant for services performed and were paid by the Appellant even when the client had not yet paid the Appellant. It is difficult to see how the consultants could have looked in the clients for payment in light of paragraph 3 of the consultant contract which prohibited disclosure to the client of the consultant's rate of pay. Further on that point I will observe that there did not exist between consultant and client any privity of contract upon which a claim by a consultant for his hourly rate could be founded.
[25] The above decision was relied upon by the Honourable Judge Watson, T.C.C. in arriving at the same conclusion in the case of Silverside Computer Systems Inc. v. Canada (Minister of National Revenue - M.N.R.), [1997] T.C.J. No. 38. At paragraph 14 of his reasons, Judge Watson concluded the worker in that appeal "was hired by the Appellant because of his skills and qualifications in order to perform services for the Appellant's client that was in need of those skills and in fact was an organization 'engaged in matching requests for work with requests for workers'". In Silverside, all workers providing services to clients were independent contractors.
[26] With respect to the first issue to be determined - whether VML is a placement or employment agency for purposes of the EI Regulations - and within the meaning of section 34 of the CPP Regulations - one must consider the evidence as it applies to the named workers. David Carl, sole shareholder of VML, admitted the following assumptions of the Minister - as set forth in subparagraphs 7(a) to 7 (d), inclusive of the Reply - were correct. Although set out earlier in these reasons, for the purpose of zeroing in on this particular issue, they are restated, as follows:
(a) the Appellant operates a business of providing computer consulting services to governments and various other clients (the "Clients");
(b) the Appellant enters into contracts with the Clients on the basis of providing them with a Worker who has the expertise required by the Client;
(c) the Client must approve of the Worker selected to fulfill the terms of the Appellant's contract with the Client;
(d) the Clients pay the Appellant for the services provided by the Workers as set out in the contracts;
[27] A perusal of the contract - Exhibit A-2 - between VML and ICBC makes it clear VML was supplying support services in relation to the contractual obligation to perform certain tasks in connection with the installation and use of data processing products. At paragraph 1 of said agreement, there is reference - at line A - to "[R]ates, Term and Personnel Assigned".
[28] The letter - Exhibit A-4 - between VML and Synertech which was utilized by both corporations to define their business relationship sets forth various aspects of their agreement including recognition that Synertech "agrees to offer the services of Imer Shahini under Contract Number 97/040 issued by the Ministry of Health, for the period starting April 1st 1996 and ending June 30th , 1996". Thereafter, there was reference in said letter to terms of the agreement between VML and Synertech being extended to conform with any subsequent renewals of the contract between Synertech and the Ministry. The letter confirmed that VML "agrees to provide the services of Imer Shahini for a minimum of 7.5 hours each day, five days a week, excepting holidays. The schedule of vacation times will be determined by the parties. Provision will be made for up to three weeks vacation per year". The letter went on to state that from time to time, the proposed schedule may be revised by the three parties involved, the Ministry, VML and Synertech.
[29] The services provided to ICBC by Randy Prime and Christine Becher were documented in Exhibit A-5, comprised of various Appendices A to F, including 3 sheets described as Appendix D. All appendices were part of and subject to the agreement - Exhibit A-2 - dated January 31, 1997 - between VML and ICBC. Either Randy Prime or Christine Becher is defined as the personnel assigned to the specific tasks within an overall project being undertaken by ICBC.
[30] The terms of the contract - Exhibit A-3 - between Cardinal and VML are somewhat different. That agreement - dated April 7, 1999 - covering the period from April 1, 1999 to March 31, 2000, inclusive, does not call for the placement or provision of any particular individual named therein or any person(s) to be provided later. Instead, it is a contract between VML and Cardinal wherein VML agrees to provide its services at a certain hourly rate to perform tasks in connection with the services Cardinal had contracted to provide to the Ministry of Health. Pursuant to clause 11 of the contract between VML and Cardinal, VML had to obtain the written consent of Cardinal before it could subcontract any of its obligations or assign any right accruing thereunder. In clause 24 of said agreement, VML - named therein as the Contractor - warranted that it would pay and discharge all wages, salaries, etc. incurred in providing the contracted services and that no employee of the Ministry - referred to as the Client - would receive anything of value as a result of said agreement. Although the contract referred to an attached Schedule "B", that document was not attached to the document filed as Exhibit A-3. The worker - Richard Bird - testified he had been working as a systems analyst for the provincial government but had left that employment in order to provide his services to VML for the specific purpose of working on a medical audit for the Ministry that was being carried out by Cardinal pursuant to a contract with the provincial government. However, he provided his services in 1998, prior to the term provided for in Exhibit A-3.
[31] The workers - Imer Shahini and Michael Haas - had been employees of VML but later each transformed his status into that of independent contractor. Shahini carried on working on a project managed by Synertech and Haas completed the task at BC Online - an agency of the provincial government - that he had worked on earlier as a co-op student while an ordinary employee of VML.
[32] The services of Susan Trice had been retained by Carl - on behalf of VML - as a result of Trice having received a call from the secretary of her professional association to advise that Carl was searching for a subcontractor. Susan Trice contacted Carl and it was apparent her services were required in connection with a specific project being undertaken by Synertech in relation to the Pharmacare project and VML was carrying out a contractual obligation to Synertech by making her specialized services available. Later, Frank Trice began to provide his technical skills to the same project with the concurrence of Carl and Jaime Peschiera, on behalf of Synertech.
[33] Taking into account the evidence as it pertains to each of the workers named in the assessment, it is clear that while there are some differences in the circumstances applicable to each individual, the appellant - VML - in each instance was responsible for the placement of those persons in a situation where they performed certain services in return for which they received remuneration from VML. The only effect of the requirement that a person must not operate an employment or talent agency unless licensed under the Employment Standards Act, RSBC Chap. 113, is to subject a person - such as VML - to prosecution for having failed to obtain the appropriate permission. It does not - however - mean that a failure to obtain the license prevents one from conducting business in a manner consistent with an employment or placement agency within the provisions of the EI and CPP Regulations relevant to the within appeals. An unlicensed dog is still a dog.
[34] There was a specific purpose inherent in Parliament having created categories of insurable and pensionable employment for workers who - by application of ordinary standards - would not satisfy the usual test of employment. In the case of Sheridan v. M.N.R. 57 N.R. 69, the Federal Court of Appeal held that the for