Date: 20000529
Docket: 98-1177-UI
BETWEEN:
GÉRARD LECOURS,
Appellant,
and
THE MINISTER OF NATIONAL REVENUE,
Respondent.
Reasons for Judgment
Charron, D.J.T.C.C.
[1] This appeal was heard in Québec, Quebec, on February 11, 2000, for the purpose of determining whether the appellant held insurable employment within the meaning of the Unemployment Insurance Act and the Employment Insurance Act (the Act) when employed by Les Entreprises Forestières Etchemin Ltée, the payer, from June 1 to October 2, 1992, from November 16 to December 11, 1992, from May 17 to November 5, 1993, from July 18 to November 18, 1994, from June 5 to November 10, 1995, and from June 10 to September 7, 1996.
[2] In a letter dated August 20, 1998, the respondent informed the appellant that the employment in question was not insurable because it did not meet the requirements of a contract of service and there was no employer-employee relationship between him and the payer.
The facts
[3] The facts on which the respondent relied in making his decision are set out as follows in paragraph 7 of the Reply to the Notice of Appeal:
[TRANSLATION]
(a) The payer, which was incorporated on December 13, 1974, operated a forestry business. (no knowledge)
(b) The payer signed contracts with heavy machinery owners to have wood cut and transported. (admitted)
(c) The appellant owned a skidder until 1993; in 1995, he sold the skidder and purchased a forwarder worth $235,000. (denied as written)
(d) The skidder and the forwarder are two pieces of machinery with the same function: to pick up the wood felled by another machine and transport it to the desired location. (admitted)
(e) During the 1992 and 1993 seasons, the appellant owned his own skidder and leased his services and his machine to the payer. (denied as written)
(f) In 1994, the appellant incorporated a company under the name of 3105-3424 Québec Inc. (hereinafter the “employer”), which was the owner of a forwarder. (admitted without prejudice)
(g) The appellant was the sole shareholder of the employer. (denied as written)
(h) In 1992 and 1993, the appellant was the only person who operated his skidder. (admitted)
(i) Since 1994, the payer has leased the services provided through the employer's forwarder; (denied as written) the appellant alternated with Alain Boivin operating the forwarder, because it could be operated 24 hours a day. (admitted)
(j) During the years at issue, the appellant always worked for the payer with his skidder or with the employer's forwarder. (denied as written)
(k) The payer signed a contract with the appellant and 3105-3424 Québec Inc. whereby it leased the machinery; a total amount was specified based on a rate per cubic meter of wood transported by the machine. (denied as written)
(l) The payer paid a fixed weekly wage to the appellant and the other operator of the forwarder. (admitted)
(m) The appellant or the employer was responsible for all costs of operating the machinery; they had to take care of all repairs and maintenance. (denied as written)
(n) If the machine broke down for an extended period, income from cutting would cease coming in and the appellant would no longer receive any pay from the payer. (denied as written)
(o) The payer paid the total income of the appellant and the employer based on the volume of wood transported; it subtracted the gross wages paid to the appellant and his man from the amounts calculated on the basis of the established rate scale. (denied as written)
(p) In 1992 and 1993, the appellant owned a skidder and worked for the payer under a contract for services and not a contract of service. (denied)
(q) From 1994, the payer continued to operate in precisely the same way except that the contract it negotiated was with 3105-3424 Québec Inc. (denied)
[4] The appellant admitted that all the subparagraphs of paragraph 7 of the Reply to the Notice of Appeal were true, with the exception of those that he denied or stated that he had no knowledge of, as indicated in parentheses at the end of each paragraph.
Testimony of Gérard Lecours
[5] Gérard Lecours is an operator and owner of forestry machinery. Prior to and up to April 13, 1994, he owned a skidder that he operated himself, cutting and transporting wood, while employed by Les Entreprises Forestières Etchemin Ltée, the payer. On April 13, 1994, 3105-3424 Québec Inc. purchased a Timberjack forwarder, which it leased to the payer for performing its woodcutting and wood transportation operations. The machine cost $235,000 (Exhibit A-5). Gérard Lecours was the sole operator of his skidder in 1992 and 1993, but, since 1994, the payer has leased the forwarder from 3105-3424 Québec Inc., which the appellant, alternating with Alain Boivin, operated 24 hours a day. During the years at issue, the appellant always worked for the payer using his skidder or the forwarder. The payer leased the machinery from the appellant or from 3105-3424 Québec Inc., as the case may be, for a total amount that was calculated according to the scaling of the wood cut and transported. The payer paid the appellant and the other operator a fixed weekly wage. The appellant filed as Exhibit A-6 the following equipment leases:
lease of June 1, 1992, between the payer and the appellant;
lease of May 15, 1993, between the payer and the appellant;
lease of May 30, 1994, between the payer and 3105-3424 Québec Inc.;
lease of May 29, 1995, between the payer and 3105-3424 Québec Inc.;
e) lease of June 1, 1996, between the payer and 3105-3424 Québec Inc.
[6] Clause 2 of each lease provides:
[TRANSLATION]
The lessor undertakes to deliver the equipment in good repair, and to warrant to Entreprises Forestières Etchemin Ltée that it can be used for the purpose for which it is leased and that the maintenance and repairs required to ensure the performance of the agreement and the use of the equipment will be carried out, subject to the right of Les Entreprises Forestières Etchemin Ltée to take care of minor maintenance of the equipment and carry out emergency repairs required to ensure that it is kept in operation.
[7] In Clause 7, concerning the status of the employees, it is agreed that:
[TRANSLATION]
The Lessor acknowledges that, subject to the rules of Les Entreprises Forestières Etchemin Ltée, the equipment operators shall be regular members of Les Entreprises Forestières Etchemin Ltée, and agrees that it may not supervise or control the said employees during field operations and acknowledges without reservation the management authority of Les Entreprises Forestières Etchemin Ltée and its agents and, more specifically, its foremen.
[8] The appellant was the sole shareholder and director of 3105-3424 Québec Inc. The appellant received his weekly wages from the payer, which paid him vacation pay and provided drug insurance and employment insurance coverage. It was 3105-3424 Québec Inc. that paid for the liability insurance. The appellant received no wages from 3105-3424 Québec Inc. Prior to 1994, the appellant paid for liability insurance, for gas, for transportation of the equipment to the forest and for repairs in case of a breakdown. The payer paid the cost of bringing the machine back to town. Since 1994, 3105-3424 Québec Inc. has paid for repairs. The appellant worked from 5:00 a.m. to 5:00 p.m.
Testimony of Yvon Roy
[9] An accounting clerk employed by the payer, Yvon Roy stated that Gérard Lecours had worked for the payer for 8 to 10 years. Since he owned a machine that could move the wood to the road, the payer hired Mr. Lecours to do it. The payer did not have that kind of equipment and needed it urgently. The payer measured the wood that was cut down and brought to the road by the appellant and it calculated the cost of transporting the wood, which it apportioned on the basis of 40% for the operator and 60% for the use of the equipment. In 1992 and 1993, the appellant owned a skidder that he leased to the payer and operated himself or had another person operate. The operator was hired by the payer or the appellant, as the case may be. Each shift lasted 10 hours: one during the day and the other at night, as the payer decided. In the event of a breakdown, the owner of the machine was responsible for the repairs, and payment of the operator's wages and the rental for the machine was suspended. Beginning in 1994, the payer leased a forwarder from 3105-3424 Québec Inc., and the appellant operated it. In this case, it was the lessor, 3105-3424 Québec Inc., that was responsible for repairs. The payer paid the owner the rental for the machines and paid the operators' wages to the operators themselves, after making source deductions from the cheque for things such as taxes, unemployment insurance, pension plan, group insurance, pension, meals and sleeping arrangements, if necessary. The payer's foreman transmitted work instructions to the workers.
Analysis of facts in light of the law
[10] It must now be determined whether the activity carried on by the appellant is included in the concept of insurable employment, that is, whether there was a contract of service.
[11] The case law has laid down four essential tests for identifying a contract of employment. The leading case is Montreal v. Montreal Locomotive Works Ltd., [1947] 1 D.L.R. 161. Those tests are: (1) control, (2) ownership of the tools, (3) chance of profit and (4) risk of loss. The Federal Court of Appeal added thereto the “degree of integration” in Wiebe Door Services Ltd. v. M.N.R., [1986] 3 F.C. 553, but this list is not exhaustive.
[12] In Attorney General of Canada v. Charbonneau, a decision rendered on September 20, 1996 (A-831-95), Décary J.A. of the Federal Court of Appeal explained that:
Moreover, while the determination of the legal nature of the contractual relationship will turn on the facts of each case, nonetheless in cases that are substantially the same on the facts the corresponding judgments should be substantially the same in law. As well, when this Court has already ruled as to the nature of a certain type of contract, there is no need thereafter to repeat the exercise in its entirety: unless there are genuinely significant differences in the facts, the Minister and the Tax Court of Canada should not disregard the solution adopted by this Court.
. . .
Here, the payer was a forestry business. It assigned the work of felling and hauling the wood to crews of two persons—a feller, who cut the trees, and a skidder operator, who picked them up and transported them to the edge of a forest road. The respondent was the owner of the skidder, a piece of heavy machinery valued at about $15,000, and he was responsible for the cost of maintaining and repairing it. He had himself recruited the feller, with whom he made up a crew. He and the feller were paid by volume, based on the number of cubic metres of wood cut down, and the contract did not specify any volume; the volume was measured every two weeks by a "measurer" employed by the payer.
. . .
The respondent worked about thirty-two hours per week and his daily work period was generally, but not necessarily, within the period proposed in the internal regulations, that is, between 7:30 a.m. and 4:00 p.m. A foreman employed by the payer checked every second day to ensure that the respondent's crew was in fact cutting the trees that had previously been identified by the payer. The method of payment was as follows: one quarter of the amount owing to the crew was paid to the respondent, one quarter was paid to the feller, and half was paid to the respondent for the use of the skidder. Thus three cheques were issued by the payer every two weeks. The cost of transporting the skidder at the beginning and end of the season was borne by the respondent; in the event that there was a change of location during the season, it was borne by the payer.
When we look at the overall picture, it is quite apparent that this was, prima facie, a contract of enterprise. The ownership of the skidder, the choice of the other crew member, payment based on an undefined volume and the autonomy of the crew are determining factors which, in the context, can only be associated with a contract of enterprise.
. . .
One factor on which the judge relied, and which led him to conclude that [TRANSLATION] "there could be no chance of profit and risk of loss" during the contract, was the fact that the respondent was paid a wage, at the rate of $2.50 per hour. This is a major factual error. In fact, the respondent was paid based on his volume of production, and the mere fact that his skidder had broken down would be sufficient for him to find himself with nothing.
. . .
[13] Counsel for the appellant led evidence that the appellant and Alain Boivin formed a team and entered into a contract of employment with the payer, Les Entreprises Forestières Etchemin Ltée, while the Timberjack forwarder was leased to that same business. Consequently, the lease of the machine and its repair and its operation should not be taken into consideration in analysing the contract of employment itself. The appellant rendered services to the payer as a skidder operator during the periods at issue. That evidence was uncontradicted.
[14] The evidence in this case differs on a number of points from that presented in Charbonneau, supra, and Canada (Procureur général) v. Rousselle et al., 124 N.R. 339. For instance:
(a) The appellant herein was paid by cheques from the payer;
(b) In paragraph 7(f) of the Reply to the Notice of Appeal, the Minister of National Revenue describes 3105-3424 Québec Inc. as the employer, which is false;
(c) From May 30, 1994, it was 3105-3424 Québec Inc. that bore all costs of operating its equipment, but the transportation at the beginning and the end of the season was taken care of by the payer;
(d) It was 3105-3424 Québec Inc. that owned the Timberjack forwarder purchased on April 13, 1994;
(e) The appellant received his instructions from the payer's foreman;
(f) The work day began at 5:00 a.m. and ended at 5:00 p.m.;
(g) The appellant received weekly wages of approximately $700 paid to him by the payer.
[15] However, the evidence reveals that the work performed by the appellant was done under the payer's supervision and that there was a relationship of subordination between the appellant and the payer. It was the payer that owned the business necessary for carrying on its activities. The payer alone could make profits or incur losses in operating its business, not the appellant, who only received a fixed wage. Finally, the appellant performed his work on the payer's job site and was well integrated into its business. I therefore find that the payer was operating a business and that the appellant was employed by it during the periods at issue, since the tools were leased to the payer by a corporation independent of the payer.
[16] The burden of proof was, to be sure, on the appellant, and he successfully discharged that burden on a balance of probabilities for the periods from July 18 to November 18, 1994, June 5 to November 10, 1995, and June 10 to September 7, 1996. In respect of the periods from June 1 to October 2, 1992, November 16 to December 11, 1992, and May 17 to November 5, 1993, the appellant had a contract for services with the payer and the appeal is dismissed with regard to those periods.
[17] Accordingly, the appeal is allowed and the decision of the Minister is varied.
Signed at Ottawa, Canada, this 29th day of May 2000.
"G. Charron"
D.J.T.C.C.
[OFFICIAL ENGLISH TRANSLATION]
Translation certified true on this 23rd day of April 2001.
Erich Klein, Revisor