Hôpital Santa-Cabrini v.. The Queen

Hôpital Santa-Cabrini v.. The Queen
Court (s) Database
Tax Court of Canada Judgments
Date
2015-10-28
Neutral citation
2015 TCC 264
File numbers
2014-1195(GST)G
Judges and Taxing Officers
Pierre Archambault
Subjects
Part IX of the Excise Tax Act (GST)
Decision Content
Docket: 2014-1195(GST)G
BETWEEN:
HÔPITAL SANTA CABRINI,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
[OFFICIAL ENGLISH TRANSLATION]
Appeal heard on June 22, 23 and 25, 2015, at Montréal, Quebec.
Before: The Honourable Justice Pierre Archambault
Appearances:
Counsel for the appellant:
Claude Nadeau
Counsel for the respondent:
Huseyin Akyol
JUDGMENT
The appeal from the assessment made under Part IX of the Excise Tax Act for the period from February 14, 2011, to April 24, 2012, notice of which is dated May 22, 2013, and bears no identifying number, is dismissed, without costs.
Signed at Ottawa, Canada, this 28th day of October 2015.
“Pierre Archambault”
Archambault J.
Translation certified true
on this 29th day of January 2016
Daniela Guglietta, Translator
Citation: 2015 TCC 264
Date: 20151028
Docket: 2014-1195(GST)G
BETWEEN:
HÔPITAL SANTA CABRINI,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
[OFFICIAL ENGLISH TRANSLATION]
REASONS FOR JUDGMENT
Archambault J.
[1] Founded by Italian sisters some 50 years ago, the Hôpital Santa Cabrini (Hôpital) includes two facilities: a general and specialized hospital with 369 beds (Centre hospitalier) and a long-term care centre with 103 beds, the Centre d’accueil Dante (Centre Dante).
[2] The Hôpital has a community mission for all Montréal East residents. It offers a wide range of health care and services and social services, and has approximately 1,600 professionals and employees to provide these services. For instance, the establishment receives approximately 400,000 visits to its emergency department and 70,000 to its outpatient clinics, has 10,000 admissions and performs nearly as many surgeries. The Centre Dante offers long-term and short-term accommodations at the drop-in centre to the seniors from the Italian community experiencing loss of independence.[1]
[3] During the relevant period covered by this appeal, i.e., February 14, 2011, to April 24, 2012 (relevant period), the Hôpital, like many other hospitals in Quebec, was facing a shortage of nurses and had to fill vacancies and absences. The Hôpital used the services of three employment agencies (Agencies) to address this shortage and obtain the personnel required to deliver nursing care. The Agencies, which employed hundreds of nurses, provided their staff members to render services under the direction and control of the Hôpital. The Agencies invoiced the Hôpital for the agreed amount for the right to retain the services of this personnel, to which they added the good and services tax (GST) provided for in the Excise Tax Act (Act), and the Quebec sales tax.
[4] On February 14, 2013, the Hôpital, through its representative, Consultaxe Ltée, submitted to the Agence du Revenu du Québec (ARQ), acting as an agent of the Canada Revenue Agency (CRA), a general application for GST rebate of $34,958.27 using the prescribed form, FP-189, dated February 6, 2013. This application was for the GST that the Hôpital allegedly paid in error, or overpaid, to its suppliers during the relevant period. The reason given by the Hôpital for the application was the exemption under section 6 of Part II of Schedule V of the Act, which reads as follows:
6. A supply of a nursing service rendered to an individual by a registered nurse, a registered nursing assistant, a licensed or registered practical nurse or a registered psychiatric nurse, if the service is rendered within a nurse-patient relationship.
6. La fourniture de services de soins rendus à un particulier par un infirmier ou une infirmière autorisé, un infirmier ou une infirmière auxiliaire autorisé, un infirmier ou une infirmière titulaire de permis ou autorisé exerçant à titre privé ou un infirmier ou une infirmière psychiatrique autorisé, si les services sont rendus dans le cadre de la relation infirmier-patient.
[Emphasis added.]
[5] The ARQ rejected the application for the rebate for the relevant period on the ground that the supply by the Agencies did not constitute an exempt supply. The Hôpital is appealing this decision.
Factual background [6] The following assumptions of fact are found in the Reply to the Notice of Appeal, which sets out the facts that the Minister of National Revenue (Minister) relied on in making the assessment at issue and which were admitted by the Hôpital:
[Translation]
24. . . .
(c) during the period at issue, the appellant paid $205,636.90 in GST to the Employment Agencies on the consideration for the supply it purchased of loaned qualified personnel in the health sector, namely, nurses, GST that was invoiced to it by said Agencies;
(d) the appellant applied for, and previously received, the partial rebate of the GST for public service bodies (hereinafter partial GST rebate) in respect of the supplies at issue, namely, $170,678.63 or 83% of the amount of $205,636.90 mentioned in the previous subparagraph, under section 259 of the ETA and the Public Service Body Rebate (GST/HST) Regulations (hereinafter the (Regulations);
(e) the amount of the rebate of $34,958.27 applied for by the appellant, which was rejected, is the difference between the amount of GST that the appellant paid, during the relevant period, to its suppliers for the supplies at issue purchased ($205,636.90) and the portion of said GST amount refunded to the appellant by Revenu Québec, after it applied for it, as a partial GST rebate in respect of said supplies ($170,678.63).
[7] The Hôpital used the following agencies during the relevant period: Agence M.D. Santé (Agence M.D) and Agence soins intermédiaire inc. (Agence S.I.) for the Centre hospitalier and Placements Formadic inc. (Agence P.F.) for the Centre Dante. The Hôpital was bound by written agreements with the first two agencies and had a verbal agreement with the third. Because the written agreements are similar, I will only reproduce excerpts from the one with the Agence S.I., filed as Exhibit A-9:
[Translation]
SERVICE OFFER
1. Mandate
The Agence Soins Intermédiaires Inc. undertakes to fill short- and long-term nurse staffing needs, by offering qualified resources, as required by the Hôpital Santa Cabrini.
2. Description of personnel
The Agence Soins Intermédiaires Inc. will be able to provide the Hôpital Santa Cabrini with health professionals in the following employment category:
• Nurse
• Assistant head
• Coordinator
• Practical nurse
3. Undertaking of Soins Intermédiaires Inc.
• Provide prompt response to requests by the Hôpital Santa Cabrini with competent, punctual and professional personnel.
• Carefully select qualified personnel to effectively respond to the needs of the Hôpital Santa Cabrini while ensuring that the resources provided adhere to the rules and regulations governing the establishment. In addition, the resources undertake to comply with the policies and procedures of the Hôpital Santa Cabrini.
• Ensure that the personnel have a valid nursing licence with the OIIQ.
• Only invoice for the time worked.
• Remain compliant with An Act Respecting Industrial Accidents and Occupational Diseases at all times.
• Continually monitor the quality of the services provided by the Agence Soins Intermédiaires Inc.
• Throughout the duration of this contract, the Agence Soins Intermédiaires Inc. undertakes not to hire, for any position or role, a person that it knows, after research and due diligence is complete, is employed with the Hôpital Santa Cabrini, or was employed with the Hôpital Santa Cabrini, within the previous 12 months, except for resources already employed with the Agence Soins Intermédiaires Inc. A $15,000 penalty shall be imposed on the offending party.
• The Agence Soins Intermédiaires Inc. undertakes not to assign a resource not liked by the Hôpital Santa Cabrini.
• Owing to a large labour shortage and in solidarity with the established practices at the Hôpital Santa Cabrini, the Agence Soins Intermédiaires Inc. shall require its personnel to be available for an additional shift if necessary. When the Hôpital Santa Cabrini requires one of its employees to work an additional shift, the Hôpital Santa Cabrini may also require Soins Intermédiaires Inc. to add an additional shift for employees on site.
4 Undertaking of the Hôpital Santa Cabrini
Throughout the duration of this contract, the Hôpital Santa Cabrini undertakes not to hire, for any position or role, a person that it knows, after research and due diligence is complete, is employed with the Agence Soins Intermédiaires Inc., or was employed with the Agence Soins Intermédiaires Inc., within the previous 12 months. A $15,000 penalty shall be imposed on the offending party.
5. Cancellation of shifts
It is agreed that if a shift is cancelled, the representative of the Hôpital Santa Cabrini shall notify the placement agency Agence Soins Intermédiaires Inc. four hours prior to the start of the shift to save our employees from an unnecessary trip. If the resource of the Agence Soins Intermédiaires Inc. arrives at your centre and his or her shift is cancelled, an invoice for four hours of work shall apply.
6. Orientation
It is agreed that orientation costs (two days) shall be incurred by the Agence Soins Intermédiaires Inc.
7. Expenses
No meal, parking or travel expenses shall be invoiced.
8. Resource requirements
In order to maximize efficiency for placement, the Hôpital Santa Cabrini undertakes to state its requirements by fax . . . or by email . . . when more than five resources are required. The Agence Soins Intermédiaires Inc. undertakes, in turn, to confirm by fax and/or email.
9. Statutory and special holidays
Statutory and special holidays shall be invoiced at double time.
Statutory holidays . . .
. . .
12. Conditions
This service offer is for the sole purpose of informing the Hôpital Santa Cabrini of the conditions it accepts if it requires [the] services of the Agence Soins Intermédiaires Inc., and vice-versa. If either party should violate one or more clauses contained in this service offer, the wronged party may cease all business relationships with the other party, for a determinate or indeterminate period of time, with or without notice, at a time decided by the party, once all amounts owing having been paid, where applicable.
The conditions of this agreement are agreed to by the parties.
[8] The agreement of course contains the price list for the provision of personnel by the Agency. In principle, it is a per diem rate, but in reality it represents an hourly rate.
[9] The evidence presented at the hearing and that contained in the transcripts of the examinations for discovery filed as Exhibit I-2, at Tabs 7, 8 and 9, describe the procedure when the Hôpital requires the Agencies’ services.
[10] The assignment office prepared a work schedule for a period of 28 days for each of its units and posted it one week prior to the start of that period. To put it together, it first assigned its own employees to the various services or units of the Hôpital. If there were positions that could not be filled, it called on its own employees who had indicated a willingness to work overtime. In doing so, it was meeting its obligations under the collective agreements binding the Hôpital and its employees. When positions could not be filled through this exercise, the assignment office contacted the Agencies to meet its needs.[2]
[11] During the relevant period, when a nurse from an Agency showed up for the first time at the Hôpital, she received orientation from a representative of the Agency or by the personnel of the Hôpital. The purpose was to allow the nurse to become familiar with the Hôpital’s facilities, equipment and internal practices. As indicated in the agreements with the Agencies, this orientation, which could last one or two days, was covered by the Agencies, that is, the Hôpital did not have to pay anything for that period. Once the nurse was familiar with the Hôpital, she reported for duty, either at the assignment office or the unit to which she was assigned. She was typically required to sign in noting the name of the Agency, date, time of arrival and departure, and the shift, day, evening or night. The Hôpital also kept a computerized daily attendance record that allowed it to be informed at all times of not only the nurses from the Agencies, but also the nurses from its own personnel. The record indicated for each day and for each service department of the Hôpital, such as emergency, data related to each type of employment, clinical nurse, assistant head nurse, nurse, practical nurse or an orderly, which bore a number corresponding to the job title, the position number, the time in and time out and a shift code. (See Exhibits A-23 and A-26.)
[12] Generally, the Agencies submitted an invoice to the Hôpital each week and the invoices indicated in a table the following data: the date work was provided, the name of the nurse employed by the Agency, the service to which the nurse was assigned, the shift, the number of hours worked, the hourly rate and the total amounts owing by the Hôpital. The table included two additional columns for adjustments and comments.
[13] The Hôpital personnel verified the accuracy of the amounts invoiced by the Agencies by consulting either the signed record or, if the signature was missing, the computerized daily attendance record. If the invoice corresponded to the data gathered by the Hôpital, it paid the amount indicated. If there was no evidence of work performed by the nurse from the Agency, it did not pay. For an example of an error on the part of an Agency, see Exhibit A-24. For an example of the invoices verified by the Hôpital from the Agence P.F. see Exhibit A-7.
[14] A representative of Agence S.I. testified at the hearing. On the Web site that the witness himself created, which is primarily intended for professionals that Agence S.I. wishes to recruit as employees (see Exhibit A‑29), is the following description of the company’s mission [Translation]: “agency specialized in nursing staffing . . . made up of a number of qualified health professionals, it offers highly competitive salaries with flexible hours.” (Emphasis added.) Further on, the following information is added:
[Translation]
In addition to providing quality training to its members, Soins intermédiaire guarantees improved integration into the labour market.
Always attentive to new requests from its employees and works actively to meet their individual needs . . . .
[Emphasis added.]
[15] As requirements and in terms of the types of employees sought, the following is indicated:
[Translation]
[W]e hire: Nurses [for]: •Operating Room •Recovery Room •Intensive Care •Emergency •Medical-Surgical •Psychiatry •Geriatrics •Pediatrics •Obstetrics •Other specializations. . . . Must be a member in good standing of a professional governing body. Competency, reliability and professionalism.
[16] Agence S.I. services the entire province of Quebec.
[17] The Agence S.I. representative described the [Translation] “Employment Application” form as the contract of employment. (See Exhibit A-30.) The future employee indicated, inter alia, his or her education, professional experience, references and availability as well as the type of employment sought. At the end of the document is the notation [Translation] “agreement made by,” and the agreed upon salary and a declaration signed by the employee that the information provided in the document is accurate. Another indication which supports the conclusion that this Agence considers its workers to be employees is the fact that it deducted taxes from their pay under tax legislation as well as Quebec Pension Plan contributions and Employment Insurance premiums. It also pays the 4% provided for in Act Respecting Labour Standards for annual leave.
[18] The contract of employment binding the nurses and Agence M.D. is much more comprehensive. (See Exhibit A-36.) It is a contract entitled [Translation] “Contract of Employment for an Indeterminate Term,” which contains the following provisions:
[Translation]
1. Duties and responsibilities of the employee
▪ The employee undertakes to adhere at all times to the policies, directives and instructions of Agence M.D. Santé inc. (hereinafter MD SANTÉ) and his or her ethical and professional obligations;
▪ It is the responsibility of the employee to maintain in good standing at all times his or her authorizations, mandatory training required by his or her governing body and work licences with competent authorities and provide MD SANTÉ with a copy;
▪ The employee of MD SANTÉ undertakes to provide upon request all information and documents that may be required by MD SANTÉ;
▪ The employee of MD SANTÉ undertakes to complete all training that may be required by MD SANTÉ;
▪ The employee of MD SANTÉ undertakes to accept assignments with at least two private or public establishments if they are compatible with the availability he or she provided;
▪ It is the responsibility of the employee to report his or her employment with MD SANTÉ to his or her professional governing body, where necessary;
▪ It is the responsibility of the employee to notify MD SANTÉ of any changes in his or her information in the course of employment;
▪ The employee shall not engage in verbal or physical behaviour that could cause injury to MD SANTÉ;
▪ The employee shall carry out his or her assignments with due diligence and professionalism;
▪ The employee has an obligation to carry with him or her at all times his or her ID card and governing body licence and wear appropriate and required clothing, if applicable;
▪ The employee shall maintain punctuality and good attendance to shifts and start the shift on time;
▪ In the event of a work-related accident or dangerous situation, the employee shall notify MD SANTÉ immediately and collaborate with it to comply with CSST requirements subject to the legislation;
2. Compensation and salaries
Unless otherwise directed by MD SANTÉ:
2.1 The employee shall receive an hourly rate established upon his or her hiring in the performance of his or her duties.
2.2 [The] employee shall receive an hourly training rate when completing training, including orientation (if applicable);
2.3 [The] employee shall not receive compensation for meal periods;
3. Reimbursement of expenses
▪ Unless otherwise specified, MD SANTÉ shall not reimburse an employee for any travel expenses or other expenses incurred in the performance of duties;
4. Pay schedule
▪ The employee shall be paid every two weeks, for all hours worked provided that the employee has filled out his or her time sheets in accordance with the directions of MD SANTÉ;
▪ Statutory leave is determined and paid in accordance with labour standards;
5. Group insurance
MD SANTÉ offers group insurance for which the terms and conditions of enrolment are determined by the insurer. However, employees who meet said enrolment terms and conditions shall maintain minimum medical coverage unless exempted by legislation;
6. RRSP and pension fund
Employees who work 250 hours during their employment with MD SANTÉ may, if they wish, contribute to a private pension fund. MD SANTÉ shall contribute to said pension fund in the same proportion as employees up to a maximum of 2% of the employees’ gross salary;
7. Workplace
▪ MD Santé alone decides where an employee will be assigned;
▪ The employee shall not accept any assignment directly from a client of MD SANTÉ;
8. Hours and schedule
▪ MD Santé does not require any minimum availability from its employees. In this regard, employees are responsible for providing their availability no later than the 15th of each month for the following month through the Intranet access granted to them;
▪ It is in the employee’s interest to regularly consult his or her profile on the Intranet owing to the fluctuating requirements of MD SANTÉ;
▪ In the event that an employee does not provide his or her availability on the Intranet for a period of three consecutive months, MD Santé shall issue a termination of employment unless there are extenuating circumstances;
▪ The policies of MD Santé on regular hours, overtime and compensatory leave and other related issues apply to this contract;
. . .
11. Confidentiality
▪ The employee undertakes to keep confidential all information not otherwise open to the public and pertaining directly and/or indirectly to MD Santé and/or its clients and/or users of the public or private health system;
. . .
13. Varia
▪ In the event that the employee is assigned to a shift with a client of MD Santé and cannot show up for the assignment, the employee shall provide MD Santé with a minimum of eight hours’ advance notice unless there is a justifiable reason;
▪ In the event that the employee must exceptionally leave during the performance of work activities for serious reasons, he or she shall notify MD SANTÉ immediately to allow it to find a replacement if required. Remuneration in this case shall cease as soon as the call is received unless otherwise agreed with MD SANTÉ.
▪ In the event of any conflict with another employee of MD Santé and/or a third party, the employee shall notify MD Santé of the situation in writing so that it may take the measures required, and verify and take appropriate action in such circumstances;
▪ MD SANTÉ reserves the right to issue from time to time directives and instructions on the Intranet site which the employee shall be required to observe;
▪ If the employee fails to observe the provisions herein, the directives and instructions of MD SANTÉ, MD SANTÉ shall take any disciplinary actions it deems appropriate in such circumstances;
▪ Subject to legislation, MD SANTÉ may terminate this contract at any time on simple written notice.
[19] The co-owner and founder of Agence M.D. also confirmed that his Agency made contributions not only to the Quebec Pension Plan and Employment Insurance, but also to a pension plan for employees who wished to be members and that the employer contribution was 50% of the total contribution up to 2% of the remuneration paid by Agence M.D. to its employees. According to the information on its Web site (See Exhibit A-34), Agence M.D. has comprehensive liability insurance coverage and CSST coverage.
[20] It is likely that the Agencies were complying with a directive issued on November 29, 2011, by the ARQ with respect to the obligations of the employment agencies. The directive provided as follows:
As employers, employment agencies must withhold Québec income tax as well as Québec Pension Plan (QPP) contributions and Québec parental insurance plan (QPIP) premiums from the remuneration paid to their employees.
[See Tab 45 of Volume 2 of the appellant’s book of authorities; Emphasis added.]
[21] It should also be added that, like the employees of the Hôpital, the employees of the Agencies carry an ID card identifying the name of their Agency. (See Exhibits A-35 and A-25.) On the ID card worn by Agence S.I. employees, is not only the photo of the Agence S.I. employee, but also the logo of Agence S.I., its telephone and fax numbers and its Internet address. On the card for Agence M.D., there is only a photo of the employee with, of course, the employee’s name and title—for example nurse—and the Agence M.D. logo.
[22] It is clear from the testimony of the various employees of the Hôpital, including a former director of finance, the person responsible for the assignment office and various unit heads, that the Agencies’ employees, albeit under the direction and control of the Hôpital in the performance of their duties, are not considered employees of the Hôpital. There is no evidence of an agreement (contract) binding the Hôpital and the nurses placed by the Agencies. On the contrary, the Hôpital undertakes not to recruit for any position or role a person that it knows [Translation] “was employed with the Agence M.D. Santé within the previous 12 months.” A $15,000 penalty is imposed if the Hôpital defaults on its undertaking. The Hôpital neither pays any direct compensation to the Agencies’ employees nor provides them with any benefits. The various witnesses of the Hôpital confirmed that when there were complaints against one of the Agencies’ employees, they contacted the Agency to advise of such matters. Ultimately, the Hôpital could request that the employee concerned in the complaint no longer be assigned to the Hôpital.
[23] It is also clear from all the evidence and testimony provided not only by the Hôpital’s employees, but also by the representatives of the three Agencies, that the sole purpose of the agreement between the Agencies and the Hôpital is the provision of personnel, that the delivery of nursing or medical services is the Hôpital’s responsibility of the, that it is the Hôpital that exercises direction and control over the work activities of the Agencies’ employees and that no representative of the Agencies is on site to direct or control the provision of nursing services. The only direction the Agencies provided in some cases was one or two orientation days when a nurse reported to work for the first time at the Hôpital. Once the employee of the Agency has received orientation, whether it be an employee of the Agence or, as was usually the case, personnel of the Hôpital, the Agency is no longer involved in the provision of nursing services by its employees. The representatives of the Agencies confirmed, inter alia, that they have no access to the records of the patients of the Hôpital.
[24] According to the policy of the Ministère de la Santé et des Services sociaux described on page 51 of its 2010-2015 strategic plan which deals with attracting, retaining and ensuring optimal contribution from human resources, the objective is to reduce the use of third party labour in clinical activity sectors with the result being a [Translation] “25% reduction in the hours worked by nursing personnel employed with private agencies by 2015.” (See Exhibit A-12.)
Analysis of the parties’ legal and economic relationships [25] Before considering whether the Hôpital meets all the necessary conditions to claim the exempt supply provided for in Schedule V of the Act, I believe that it is useful to define the legal and economic relationships between the various parties.
[26] First, some context would prove useful. A patient arrives at the Hôpital and requires medical care. This person may arrive at the emergency department, the outpatient clinic or simply be hospitalized. The patient must first register before receiving care, and it is a matter of judicial notice that the patient receives, if he or she does not already have one, a card from the Hôpital confirming his or her patient status. If the patient is a resident of the province, he or she holds a Quebec health card and all costs related to care are covered by the Régie de l’assurance maladie or funded by the budget allocated to the Hôpital by the government. If the patient does not have a health care plan, particularly if the patient is a foreign tourist, he or she will have to pay for the care received in the Hôpital.
[27] To provide its hospital services, the Hôpital hires personnel, whether it be administrative staff, nursing personnel, patient attendants, housekeeping and maintenance staff or security staff. In the jargon of the Act, that is a portion of its inputs.
[28] Because its needs cannot be all met by its employees, either those on call or those who are willing to work overtime, the Hôpital requires the services of employment agencies that provide it with the personnel it needs. It has contracts with three agencies. These contracts stipulate that the agencies must provide competent and experienced personnel for the positions that the Hôpital must fill and perform the required tasks.
[29] In order to provide the personnel in question, the Agencies hire nurses. Indeed, the evidence revealed that contracts of employment are entered into between the Agencies and the nurses who will be placed in the hospitals, including the Hôpital. In the case of Agence M.D., it is a proper contract of employment containing the standard terms and conditions of a contract of employment.[3] In the case of Agence S.I., it is an employment application form that is signed by the employee and which the representative of Agence S.I. considers to be its contract of employment. Besides the fact that the expressions [Translation] “employment application,” “agreement made by” and “salary” are used, the conduct of Agence S.I. is consistent with its argument that its nurses are its employees because not only does Agence S.I. deduct income tax at source, but it also deducts Employment Insurance premiums and Quebec Pension Plan contributions.
[30] In the authorities and case law, the relationship between the client—the Hôpital in this case—the employment agency and the agency’s personnel is often described as being a “tripartite” relationship resulting from a contract of employment. In the Civil Code of Québec (C.C.Q.), among the 18 nominate contracts[4] there is not one that describes either this tripartite relationship or, particularly, the relationship between the employment agency and its client. There is some legal and jurisprudential uncertainty with respect to the characterization of this type of relationship.[5] In my view, it is possible to consider four distinct scenarios to describe the relationship between the various parties.
[31] The first scenario would be a contract under which the Agency would undertake to provide health care services. This would be a contract of enterprise or for services under article 2098 C.C.Q.[6] The object of the prestation would be to provide a service, i.e., health care to patients. The popular expression “subcontract” could be used; under this contract, the Hôpital would task the Agency with providing certain health services in much the same way as a general construction contractor may hire a plumber, an electrician or a plasterer to perform specific plumbing, electrical or plastering work.[7] In the construction industry, it is common and easy to subcontract these activities as they are specific, well-defined tasks. It is not necessary for the payer, the general contractor, to exercise a right of direction or control over the performance of the work. The only thing that matters is the end result. In this case, I do not believe that such a conclusion can be adopted, as the object of the prestation in the contract with the Agencies is not to provide health care, but rather to provide personnel who will be able to provide health care services whose scope cannot be defined beforehand because the services are too varied. In the words of the representative of Agence S.I., the agreement between the Agency and the Hôpital concerns the provision of personnel who provide health care services to the patients of the Hôpital.
[32] Furthermore, it would not be appropriate in the context of a hospital to allow it to subcontract part of the health care offered in its establishment, as its mission under section 100 of An Act Respecting Health Services and Social Services[8] is “to ensure the provision of safe . . . quality health . . . services. . . . Section 101, second paragraph, provides that “every institution must, in particular, dispense the required health . . . services directly, or have them provided by an institution, body or person with which or with whom it has entered into a service agreement under section 108.” There is an expectation in these circumstances that the Hôpital itself exercises the direction and the control over the services to be provided.[9] The services to be provided cannot be specified as is the case for a plumber, an electrician or a plasterer. In addition, there was no representative of the Agencies to supervise their employees’ work. It is essential that the worker placed by the Agencies integrate into the team of various services or care units within which the worker works and this provision of services necessarily requires the Hôpital to exercise a right of direction and control over his or her work. To conclude, one cannot find in the circumstances of this appeal that there is a subcontracted contract for services under which the Agencies would have provided health care services to patients of the Hôpital.
[33] In the second scenario, the object of the prestation would be the recruitment of personnel with the Agency undertaking to search for competent personnel and offer it to the Hôpital so that the Hôpital can hire the workers itself. In such a scenario, the person recruited by the Agency becomes an employee of the Hôpital. This would also be a contract for service, as the prestation consists in searching for, identifying, interviewing and suggesting a potential employee to the Hôpital.
[34] Here, the evidence does not at all show that the Hôpital entrusted the three Agencies with the mandate of recruiting persons who would become employees of the Hôpital. The Hôpital needs to fill positions temporarily and does not seek to hire a worker for the long-term, even though some may believe that is what the Hôpital ought to do. Indeed, the agreements specifically prohibit hiring workers placed by the Agencies and a penalty is also provided for in cases where the Hôpital itself hires a nurse. The advantage for the Hôpital in not recruiting employees full-time is the flexibility to terminate the services of the worker placed by the Agency as soon as the need is gone. It is a matter of judicial notice that in matters of dismissal of its employees the Hôpital is subject to much more onerous obligations under its collective agreements.
[35] It should also be added that the workers placed by the Agencies do not have any desire either to become employees of the Hôpital as they do not wish to be subject to the control that could be exercised by the Hôpital over their schedules. By working for the Agency, they reserve the right to accept or refuse to work for any hospital, as the agreement between the worker and the Agency provides that it is the worker who decides when and where to work.
[36] Also, the reality is that workers placed by the Agencies are not on the payroll of the Hôpital. The Hôpital does not provide any remuneration or benefits. The only remuneration these workers are entitled to is that paid by the Agencies, and the hospitals have nothing to do with the terms and conditions of the contract of employment between the workers and the Agencies. Indeed, there is no contractual relationship between the Hôpital and the nurses placed by the Agencies.
[37] The third scenario is a variant of the previous one. The Agencies would act as agents of the Hôpital and would hire personnel on behalf of the Hôpital covertly, without the Hôpital having to openly acknowledge that it is the real employer of the workers.
[38] In my view, the facts in evidence in this appeal do not show the existence of such a covert mandate conferred upon the Agencies by the Hôpital for the purpose of hiring nurses. First, there is no written contract of mandate. The only written contract in existence is a contract under which the Agencies undertake to provide workers in order to integrate them into the teams of the Hôpital. Nor is there, in my view, any verbal agreement between the Hôpital and the Agencies or the workers of these Agencies that would establish that the Agencies would be acting as agents of the Hôpital.
[39] Moreover, for the reasons set out in the analysis of the second scenario, each of the parties would have an interest in preventing the Agencies’ workers from becoming employees, legally speaking, by way of a contract of mandate. Indeed, the Hôpital and the workers do not intend that the workers hired by the Agencies become employees of the Hôpital. I think one cannot conclude here, based on the evidence, that there was a covert contract when there is no indication of any intent or conduct contrary to what was established in the version presented by the parties.[10]
[40] Rather, it should be found that the agreements entered into in this case must be afforded their legal effects consistent with the intent of the parties and as they appear from a reading of their contract provisions. The first contract is a contract of employment between the Agencies and the workers. For at least one of the Agencies, there is a duly written contract, entitled [Translation] “Contract of employment for an indeterminate term,” in which it is clear that the workers become employees of the Agency and that the workers agree to provide services under the direction and control of the payer, the Agency. Though not as exhaustive, the other written contract is also a contract of employment. As the directive issued by the Agencies to their workers is to provide their services at the Hôpital, the Agencies delegate to the Hôpital their right to the prestation of work and their right of direction and control over the workers’ work, rights they acquired under the contract of employment. I reiterate, the only contractual relationship between the Agencies’ workers is the contract binding them to the Agencies. The other contract is the agreement to supply personnel between the Hôpital and the Agencies, under which the Agency undertakes to meet the nurse staffing needs of the Hôpital. There is a written contract between the Hôpital and Agence M.D. (see Exhibit A-8) and another with Agence S.I. (see Exhibit A-9).[11] There was only a verbal agreement with Agence P.F. for the Centre Dante.
[41] Since the first three scenarios are not applicable here, the fourth one will allow us to more specifically characterize the nature of the contract binding the Agencies and the Hôpital. First, it is important to note again that there is no legal relationship between the Hôpital and the Agencies’ workers. As mentioned repeatedly, the only legal relationship binding these workers stems from their contract of employment with the Agencies. The only legal relationship binding the Hôpital stems from the agreement with the Agencies. Consequently, it cannot be found that a contract of employment existed between the Hôpital and the Agencies’ workers. These workers are employees of the Agencies and the Agencies do not act as agents of the Hôpital when they hire said personnel. It should be noted that the Agencies recruit the workers. The evidence showed that these Agencies may have contracts binding them to hundreds of workers (from 400 to 600) which allow them to meet the hospitals’ staffing needs.
[42] Because the workers employed by the Agencies are bound by a contract of employment, there is a relationship of subordination between each of the Agencies and their workers. By signing their contract of employment, the workers undertake to accept the Agencies’ assignments to work in various hospitals. What the Agency obtains from this contract of employment—which is the essence of a contract of employment—is the right or power to exercise direction and control over its workers’ work. The Agencies could certainly decide to provide health care services themselves and require their workers to provide services to the Agencies’ clients. However, that is not their mission. As for the Hôpital, the Agencies merely transfer to it for a limited period the right to require their employees to perform work, and they delegate to it as an accessory the right to exercise direction and control over said work.
[43] How then can we characterize the nature of the contract binding the Agencies and the Hôpital? Is it one of the 18 nominate contracts of the C.C.Q.? The more likely to apply, at first blush,[12] is the contract of enterprise or for services, provided for in articles 2098 et seq. of the C.C.Q. It is us