Mazraani v. R. - TCC: Insurance agent was an employee engaged in insurable employment

Mazraani v. R. - TCC:  Insurance agent was an employee engaged in insurable employment

http://decision.tcc-cci.gc.ca/tcc-cci/decisions/en/item/143580/index.do

Mazraani v. M.N.R.  (April 12, 2016 – 2016 TCC 65, Archambault J.).

Précis:   This case dealt with whether an insurance agent selling life, disability and health insurance on behalf of Industrial Alliance Insurance and Financial Services Inc. (“Industrial”) in the province of Québec was engaged in insurable employment for the purposes of the Employment Insurance Act (the “EIA”).   CRA ruled that Mr. Mazraani was an independent contractor and he appealed to the Tax Court.  The Tax Court in what is likely that longest Tax Court decision this year (and one of the longest Tax Court decisions in many years) - 304 paragraphs, 2 appendices and 292 footnotes - reversed the finding of CRA and ruled that Mr. Mazraani was engaged in insurable employment with Industrial.  The Court also ordered Industrial to pay Mr. Mazraani $2,000 in costs.

Decision:   This case will likely not have much impact on employers outside the context of the insurance and related industries who rely upon fleets of agents as salespersons.  To say the least, the Court was clearly not impressed by the evidence adduced by Industrial:

E. Credibility of the IA witnesses

[222]   When witnesses are affirmed or sworn, they affirm or swear that they will tell the truth, the whole truth and nothing but the truth. Experience teaches that not all witnesses fulfil this commitment. Some lie; some mislead; some are mistaken; some believe that they are telling the truth when the reality is actually quite different; some embellish the facts. However, when executives of well‑known and reputed corporations, members of the legal profession, and people in authority, such as a police officer, are testifying, the expectation is that they will have higher standards in honouring their oath.

[223]   In this particular appeal, there were a senior vice-president of the fourth largest life insurance company in Canada, an in-house counsel, and a branch manager who testified. Their testimony was, to say the least, troubling. Some of their statements embellished reality, others were misleading and still others bordered on perjury.

The Court concluded that Industrial had adopted a policy in 1993 to make all of their agents independent contractors for the purposes of the EIA in order to reduce expenses.  The Court concluded that Industrial’s policy was legally ineffective:

[299]   It is evident that the Company tried its best to convert the status of its agents from that of employees to that of independent contractors in 1993. As stated in the CRT reasons and in the testimony of Mr. Michaud before this Court, most if not all of its competitors were using that business model. In my view, there are obvious benefits for a company in doing so. For instance, it does not have to contribute to the federal employment insurance program or to the Quebec Pension Plan.

[300]   Industrial Alliance tried, in effect, to convert a square into a circle by creating an octagon in the hope that it would look as much like a circle as possible, but in the end, the figure still has angles, and that prevents it from ever becoming a circle. However how long one looks at the octagon to find a circle, it will never be found. It should be remembered that, in order for there to be a contract for services, there must be no relationship of subordination involved. If there is such a relationship, then the contract is a contract of employment. Professor Robert P. Gagnon stated in paragraph 94 of his above-cited work (5th ed.):

. . .

However, even in its most relaxed and attenuated forms, the situation of legal subordination should suffice to place the worker in the employee category. The exclusion of any relationship of subordination between the client and a contractor or provider of services now legitimizes this conclusion (article 2099 of C.C.Q.). . . .

[Emphasis added.]

[301]   Mr. Mazraani was, during the relevant period, an employee of Industrial Alliance because he was performing his services “according to the instructions and under the direction or control of” the Company, the employer, in accordance with section 2085 of the Quebec Civil Code. His Agent Contract was a contract of employment. Therefore he held insurable employment during the relevant period while working for Industrial Alliance.

Industrial was directed to pay $2,000 in costs to Mr. Mazraani.

It is unclear what impact, if any, this decision will have outside of the province of Québec.