[1] The Crown seeks judicial review of a decision of a Deputy Judge of the Tax Court, reported as Nelson v. Canada, [2000] T.C.J. No. 257 (QL), allowing an appeal from assessments for premiums under the Unemployment Insurance Act, R.S.C. 1985, c. U-1 and the regulations thereunder in relation to the period from January 1, 1995 to June 30, 1996, and its successor the Employment Insurance Act, S.C. 1996, c. 23, and the regulations thereunder, for the period from July 1, 1996 to October 31, 1996.

[2] For purposes of this appeal, the relevant provisions of the two statutory schemes are substantially the same, and so for convenience I will refer only to the later legislation. The conclusions are the same under both statutory schemes.

[3] The facts are not in dispute. In 1995 and 1996, the respondent Connie Nelson was a member of a partnership that operated a hairdressing salon under the name "Team JK". The partnership had some employees and it is common ground that the employees were engaged in insurable employment. Team JK also entered into arrangements with four individuals who were not employees but "chair renters". The issue in this appeal is whether the chair renters were engaged in insurable employment.

[4] The Tax Court Judge found that each of the chair renters operated her own business and provided no services to Team JK. Team JK provided some training to the chair renters, the particulars of which were unspecified. Each chair renter had her own customers and made her own appointments. The chair renters charged less for the services rendered to their customers than Team JK charged for its services. Walk-in customers went to Team JK employees. The chair renters collected cash payments from their customers directly, with the transaction not being recorded in the Team JK till. However, credit card payments were processed through the Team JK account and reimbursed by Team JK to the chair renters in cash.

[5] Each chair renter paid Team JK a fixed amount per month for the exclusive use of a particular chair in the Team JK salon, and for the use of hair dryers, towers, the washer and dryer, sinks, the perming station, perming rods and papers. The chair renters supplied their own combs, brushes, blow dryers, curling irons and other small equipment, and carried hair products which they sold to their customers. They would occasionally sell products carried by Team JK, for which they reimbursed Team JK the wholesale price.

[6] The chair renters were engaged in insurable employment during the relevant period if they were within the scope of paragraph 6(d) of the Employment Insurance Regulations (and its predecessor paragraph 12(d) of the Unemployment Insurance Regulations). Paragraph 6(d) 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:

[...]

(d) employment of a person in a barbering or hairdressing establishment, where the person

(i) provides any of the services that are normally provided in such an establishment, and

(ii) is not the owner or operator of the establishment [...]

6. Sont inclus dans les emplois assurables, s'ils ne sont pas des emplois exclus conformément aux dispositions du présent règlement, les emplois suivants :

[...]

d) l'emploi exercé par une personne auprès d'un salon de barbier ou de coiffure, si :

(i) d'une part, elle fournit des services qu'offre normalement un tel établissement,

(ii) d'autre part, elle n'est pas le propriétaire ni l'exploitant de cet établissement [...].

[7] It is common ground that the Team JK store was a hairdressing establishment within the meaning of paragraph 6(d) of the Employment Insurance Regulations. The Tax Court Judge held that the chair renters were employed in that hairdressing establishment, that they provided the services normally provided in such an establishment, and that they were not the owners or operators of the establishment.

[8] Despite those findings, however, the Tax Court Judge concluded that paragraph 6(d) of the Employment Insurance Regulations did not apply to the chair renters. He held that the terms and conditions of service of the chair renters in this case were not similar to the terms and conditions of service of persons engaged by Team JK under a contract of service. On that basis, he held that paragraph 6(d) of the Employment Insurance Regulations is ultra vires in so far as it purports to apply to the chair renters, and should be read down so that it does not apply to them.

[9] To understand this conclusion, it is necessary to consider the portions of section 5 of the Employment Insurance Act that authorize the enactment of paragraph 6(d) of the Employment Insurance Regulations:

Employment Insurance Act, paragraph 5(1)(d)

(successor to paragraph 3(1)(d) of the Unemployment Insurance Act)

5. (1) Subject to subsection (2), insurable employment is [...]		5. (1) Sous réserve du paragraphe (2), est un emploi assurable_: [...]

(d) employment included by regulations made under subsection (4) or (5) [...].		d) un emploi prévu par règlement pris en vertu des paragraphes (4) et (5) [...].

Employment Insurance Act, paragraph 5(4)(c)

(successor to paragraph 4(1)(c) of the Unemployment Insurance Act)

5. (4) The Commission may, with the approval of the Governor in Council, make regulations for including in insurable employment [...]		5. (4) La Commission peut, avec l'agrément du gouverneur en conseil, prendre des règlements en vue d'inclure dans les emplois assurables_: [...]

(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 [...].		c) l'emploi qui n'est pas un emploi aux termes d'un contrat de louage de services, s'il paraît évident à la Commission que les modalités des services rendus et la nature du travail exécuté par les personnes exerçant cet emploi sont analogues aux modalités des services rendus et à la nature du travail exécuté par les personnes exerçant un emploi aux termes d'un contrat de louage de services [...].

[10] Clearly, the Tax Court Judge treated the provisions of paragraph 5(4)(c) of the Employment Insurance Act as stating preconditions to the application of paragraph 6(d) of the Employment Insurance Regulations. The same reasoning was rejected by this Court in Canada (Procureur général) v. Agence de Mannequins Folio Inc. (1993), 164 N.R. 74 (F.C.A.). In that case Hugessen J.A., speaking for the Court, said this (translation):

[1] This is an application for judicial review of a judgment of the Tax Court of Canada which held that models who worked for the respondent agency were not engaged in insurable employment within the meaning of paragraph 12(g) of the Regulations (Unemployment Insurance Regulations):

"12 Employment in any of the following employments, unless it is excepted employment under subsection 3(2) of the Act or excepted from insurable employment by any other 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 such services."

[2] The nub of the trial judge's reasoning is found in the following paragraph of his reasons:

"I am of the view that the three conditions in Regulation 12(g) were fulfilled in the circumstances of these appeals, taking into consideration the testimony heard, the documents produced and the admissions made on behalf of the Appellants; however, the primary condition of Section 4(1)(c) appears to be absent. (Record, case no. A-1184-91, page 63)

[3] Paragraph 4(1)(c) of the Unemployment Insurance Act, R.S.C. 1985, c. U-1, to which that passage refers, reads as follows:

"4.(1) The Commission may, with the approval of the Governor in Council, make regulations for including in insurable employment

. . . . .

(c) any 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;"

[4] We are all of the opinion that the trial judge erred in law. Section 4 sets out the parameters within which the Commission may exercise its regulation-making power. The validity of section 12 of the Regulations was not challenged in this case. The provisions that allow for the power to be exercised are not conditions for the application of the regulation made under that power. Paragraph 12(g) of the Regulations sets out its own conditions, and the trial judge had no need to look for other conditions in the enabling provision.

[11] In my view, the reasoning of Hugessen J.A. should apply to the interpretation and application of paragraph 6(d) of the Employment Insurance Regulations in this case. Paragraph 5(4)(c) of the Employment Insurance Act is intended to permit the Commission to identify classes of persons for inclusion in the statutory scheme. It must be presumed that the Commission, in enacting paragraph 6(d) of the Employment Insurance Regulations, did so because it appeared to the Commission that, for persons working in barbering and hairdressing establishments in the circumstances described in paragraph 6(d), the terms and conditions of their service and the nature of their work is similar to that of employees working in such establishments. But that does not mean that in the case of a particular individual, the application of paragraph 6(d) of the Employment Insurance Regulations may be challenged on the basis that there is no similarity between the terms and conditions of service of that individual and the terms and conditions of service of an employee. Thus, once the Tax Court Judge found as fact that the chair renters met the conditions stated in paragraph 6(d) of the Employment Insurance Regulations, it was not open to him to decide that the regulation could not be applied because there were additional conditions in paragraph 5(4)(c) of the Employment Insurance Act that had not been met. It follows that if the regulation was validly enacted, the Crown is entitled to succeed in this application for judicial review.

[12] In this case, unlike Agence de Mannequins Folio, the validity of paragraph 6(d) of the Employment Insurance Regulations is challenged. The argument is that it is ultra vires in so far as it purports to extend the scope of the Employment Insurance Act to a person who does not provide services to the party that is to be treated as the notional employer of that person. I am unable to accept this argument.

[13] As indicated above, paragraph 5(4)(c) of the Employment Insurance Act permits the Commission to extend the application of the Act to any employment:

... 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.		... s'il paraît évident à la Commission que les modalités des services rendus et la nature du travail exécuté par les personnes exerçant cet emploi sont analogues aux modalités des services rendus et à la nature du travail exécuté par les personnes exerçant un emploi aux termes d'un contrat de louage de services.

[14] Counsel for Ms. Nelson argues that Commission's authority under paragraph 5(4)(c) of the Employment Insurance Act did not permit the Commission to find a similarity between the terms and conditions of service (les modalités des services) of the Team JK chair renters and the employees of Team JK, because the chair renters provided services only to their own customers and not to Team JK. I cannot accept that interpretation of paragraph 5(4)(c) because it requires reading into the provision words that are not there and are not necessarily implied.

[15] The English phrase "terms and conditions of service" and the French phrase "modalités des services" are general terms and describe more than the contractual arrangements between Team JK and the chair renters. They are broad enough to include, for example, the contractual arrangements between the chair renters and their own customers. Therefore, it is open to the Commission to conclude that chair renters in a hairdressing establishment who provide no service to the owners of the establishment are nevertheless engaged in employment that is appropriately described by the words of paragraph 5(4)(c) of the Employment Insurance Act.

[16] Counsel for Ms. Nelson also argued that the employment of chair renters cannot be treated as insurable employment without first obtaining the approval of the Governor in Council and an affirmative resolution of Parliament. He relies on subsection 5(5) of the Employment Insurance Act (successor to subsection 4(2) of the Unemployment Insurance Act), which reads as follows:

5. (5) The Commission may, with the approval of the Governor in Council and subject to affirmative resolution of Parliament, make regulations for including in insurable employment the business activities of a person who is engaged in a business, as defined in subsection 248(1) of the Income Tax Act.		5. (5) La Commission peut, avec l'agrément du gouverneur en conseil et sous réserve d'une résolution du Parlement à cet effet, prendre un règlement en vue d'inclure dans les emplois assurables l'activité commerciale de toute personne qui exploite une entreprise au sens du paragraphe 248(1) de la Loi de l'impôt sur le revenu.

[17] Assuming that the reasons of the Tax Court Judge in this case would permit the conclusion that the chair renters are engaged in a business as defined in the Income Tax Act, it may be that subsection 5(5) of the Employment Insurance Act should be read as counsel for Ms. Nelson suggests. However, that would not detract from the conclusion that the paragraph 6(d) of the Employment Insurance Regulations was authorized by paragraph 5(4)(c) of the Employment Insurance Act.

[18] Counsel for Ms. Nelson asserts an alternative argument based on what he says is a fundamental aspect of the Employment Insurance Act, which is that employers or those who are treated for purposes of the Act as employers are obliged to withhold and remit employee premiums from remuneration payable to the insured persons. He argues that in a situation where there is no remuneration flowing in that direction, the Employment Insurance Act cannot or should not be applied.

[19] I am unable to agree that the payment of employee premiums through withholding from remuneration is such a fundamental aspect of the statutory scheme that it demands a narrower reading of paragraph 5(4)(c) of the Employment Insurance Act.

[20] It is true that the basic mechanism for the collection of employee premiums is through the withholding of amounts from remuneration payable to persons engaged in insurable employment which is then remitted with the employer premium. Section 67 and 68 and subsection 82(1) of the Employment Insurance Act (successor to subsections 51(1), 50(1) and 53(1) of the Unemployment Insurance Act) read as follows:

67. Subject to section 70, a person employed in insurable employment shall pay, by deduction as provided in subsection 82(1), a premium equal to their insurable earnings multiplied by the premium rate set by the Commission.		67. Sous réserve de l'article 70, toute personne exerçant un emploi assurable verse, par voie de retenue effectuée au titre du paragraphe 82(1), une cotisation correspondant au produit obtenu par multiplication de sa rémunération assurable par le taux fixé par la Commission.

68. Subject to sections 69 and 70, an employer shall pay a premium equal to 1.4 times the employees' premiums that the employer is required to deduct under subsection 82(1).		68. Sous réserve des articles 69 et 70, la cotisation patronale qu'un employeur est tenu de verser correspond à 1,4 fois la cotisation ouvrière de ses employés qu'il est tenu de retenir au titre du paragraphe 82(1).

82. (1) Every employer paying remuneration to a person they employ in insurable employment shall

(a) deduct the prescribed amount from the remuneration as or on account of the employee's premium payable by that insured person under section 67 for any period for which the remuneration is paid; and

(b) remit the amount, together with the employer's premium payable by the employer under section 68 for that period, to the Receiver General at the prescribed time and in the prescribed manner.

82. (1) L'employeur qui paie une rétribution à une personne exerçant à son service un emploi assurable est tenu de retenir sur cette rétribution, au titre de la cotisation ouvrière payable par cet assuré en vertu de l'article 67 pour toute période à l'égard de laquelle cette rétribution est payée, un montant déterminé conformément à une mesure d'ordre réglementaire et de le verser au receveur général avec la cotisation patronale correspondante payable en vertu de l'article 68, au moment et de la manière prévus par règlement.

[21] However, when Parliament empowered the Commission to extend the scope of the legislation to workers not engaged under contracts of service, they would surely have been aware that in some situations there might not be a flow of funds from the owners of business establishments to insured persons to permit the operation of the normal withholding and remittance procedure. That procedural deficiency was resolved by permitting the enactment of additional regulations that impose on the owners of such establishments an independent obligation to pay the employee premiums, presumably leaving it to them to work out a method of recovering the employee premiums from the insured workers.

[22] Paragraphs 108(1)(g), (h) and (i) of the Employment Insurance Act (successor to paragraphs 75(1)(g), (h) and (i) of the Unemployment Insurance Act) provide ample authority for the enactment of regulations stipulating methods of payment other than withholding and remittance:

108. (1) The Minister may, with the approval of the Governor in Council, make regulations [...]

(g) for defining and determining earnings, pay periods and the amount of insurable earnings of insured persons and for allocating their earnings to any period of insurable employment;

(h) for determining the amount of premiums payable;

(i) for prescribing and regulating the manner, conditions and times for paying and recording premiums [...]

108. (1) Le ministre peut, avec l'agrément du gouverneur en conseil, prendre des règlements_: [...]

g) concernant la définition et la détermination de la rémunération, de la période de paie et du montant de la rémunération assurable des assurés, et la répartition de la rémunération sur une période d'emploi assurable;

h) prévoyant la façon de déterminer le montant des cotisations à payer;

i) visant à prescrire et réglementer le mode, les conditions et les dates de paiement et d'enregistrement des cotisations [...].

[23] With respect to barbering and hairdressing establishments, the applicable regulation is section 8 of the Insurable Earnings and Collection of Premiums Regulations (successor to section 16 of the Unemployment Insurance (Collection of Premiums) Regulations), which reads as follows (emphasis added):

8. (1) Every owner or operator of a barbering or hairdressing establishment shall, for the purpose of maintaining records, calculating insurable earnings and paying the premiums payable on those insurable earnings under the Act and these Regulations, *be deemed to be the employer of every person whose employment in connection with the establishment is included in insurable employment under paragraph 6(d)* of the Employment Insurance Regulations.		8. (1) Le propriétaire ou l'exploitant d'un salon de barbier ou de coiffure *est réputé, aux fins de la tenue des registres, du calcul de la rémunération assurable et du paiement des cotisations exigibles à cet égard aux termes de la Loi et du présent règlement, être l'employeur de toute personne dont l'emploi dans le cadre de cette entreprise est inclus dans les emplois assurables en vertu de l'alinéa 6d) du Règlement* sur l'assurance - emploi.

(2) Every owner or operator of a barbering or hairdressing establishment who is deemed by subsection (1) to be an employer of a person shall, for each week in which the person is engaged in insurable employment in the establishment, *pay and remit to the Receiver General the employee's premiums and the employer's premiums* in accordance with the Act and these Regulations.		(2) Le propriétaire ou l'exploitant d'un salon de barbier ou de coiffure qui est réputé être l'employeur d'une personne en vertu du paragraphe (1) doit, pour chaque semaine au cours de laquelle la personne exerce un emploi assurable dans le cadre de cette entreprise, *payer et verser au receveur général les cotisations ouvrières et les cotisations patronales* conformément à la Loi et au présent règlement.

(3) Where the owner or operator of a barbering or hairdressing establishment is unable to determine the insurable earnings of a person whose employment in connection with the establishment is included in insurable employment under paragraph 6(d) of the Employment Insurance Regulations, the amount of insurable earnings of the person for each week during that employment shall be deemed, for the purposes of the Act and for the purposes of these Regulations, to be an amount (rounded to the nearest dollar) equal to 1/78 of the maximum yearly insurable earnings, unless the owner or operator of the establishment maintains records that show the number of days on which the person worked in each week, in which case the amount of the person's insurable earnings for that week shall be deemed to be an amount (rounded to the nearest dollar) equal to the lesser of		(3) Lorsque le propriétaire ou l'exploitant d'un salon de barbier ou de coiffure est dans l'impossibilité d'établir la rémunération assurable d'une personne dont l'emploi dans le cadre de cette entreprise est inclus dans les emplois assurables en vertu de l'alinéa 6d) du Règlement sur l'assurance-emploi, la rémunération assurable de cette personne pour chaque semaine où elle exerce cet emploi est réputée, pour l'application de la Loi et du présent règlement, être le montant (arrondi à un dollar près) égal à 1/78 du maximum de la rémunération annuelle assurable. Toutefois, si le propriétaire ou l'exploitant de l'entreprise tient des registres indiquant le nombre de jours travaillés par la personne au cours de chaque semaine, le montant de la rémunération assurable de celle-ci pour une semaine donnée est réputé être le montant (arrondi à un dollar près) égal au moins élevé des montants suivants :

(a) the number of days the person worked in that week multiplied by 1/390 of the maximum yearly insurable earnings, and		a) le produit de la multiplication du nombre de jours travaillés par elle au cours de cette semaine par 1/390 du maximum de la rémunération annuelle assurable;

(b) 1/78 of the maximum yearly insurable earnings.		b) le montant représentant 1/78 du maximum de la rémunération annuelle assurable.

[24] As I read these regulations, they impose on Team JK an obligation to pay both the employee premiums and the employer premiums with respect to the chair renters who are within the scope of paragraph 6(d) of the Employment Insurance Regulations. I must conclude that the partners of Team JK, including Ms. Nelson, were properly assessed for those premiums.

[25] For these reasons, the Crown's application for judicial review should be allowed with costs. The decision of the Deputy Judge of the Tax Court should be set aside and the matter remitted to the Tax Court for an order dismissing the appeals of Ms. Nelson from the assessments of premiums under the Employment Insurance Act and the Unemployment Insurance Act.

Karen R. Sharlow

J.A.

"I agree

Marshall Rothstein J.A."

"I agree

Marc Noël J.A."

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