Citation: 2012 TCC 40
Date: 20120131
Docket: 2011-1540(EI)
BETWEEN:
HÉLÈNE L. PERRON,
Appellant,
and
THE MINISTER OF NATIONAL REVENUE,
Respondent,
and
LES PLACEMENTS BASQUE INC.,
Intervener.
[OFFICIAL ENGLISH
TRANSLATION]
REASONS FOR JUDGMENT
Jorré J.
[1]
The respondent
determined that the appellant was not employed in insurable employment during
the period of May 23 to September 25, 2010, when she worked for Les Placements
Basque Inc. (the payor).
[2]
The appellant
challenges this decision.
[3]
The respondent does not
challenge the fact the appellant was an employee of the payor.
[4]
However, the respondent
found that the appellant was engaged in excluded employment because a similar
contract of employment would not have been entered into if the payor and the
appellant had been dealing with each other at arm's length.
[5]
The relevant provisions
of the Employment Insurance Act are subsections 5(2)(i) and 5(3):
5(2) Insurable employment does not include
...
(i) employment if the employer and
employee are not dealing with each other at arm's length.
(3) For the purposes of paragraph (2)(i):
(a) the question of whether persons are not dealing
with each other at arm’s length shall be determined in accordance with the Income
Tax Act; and
(b) if the employer is, within the meaning of that Act,
related to the employee, they are deemed to deal with each other at arm’s
length if the Minister of National Revenue is satisfied that, having regard to
all the circumstances of the employment, including the remuneration paid, the
terms and conditions, the duration and the nature and importance of the work
performed, it is reasonable to conclude that they would have entered into a
substantially similar contract of employment if they had been dealing with each
other at arm’s length.
[6]
During the period in
question, the payor's shareholders were Jean-Marc Carré, Claude Poulin, Gilles
Perron, André Perron and the appellant.
[7]
Other than the
appellant, each shareholder held 23% of the voting shares. The appellant held
8% of the voting shares.
[8]
The appellant is Gilles
Perron's wife.
[9]
The appellant and Gilles
Perron are André Perron's parents. Jean-Marc Carré and Claude Poulin are Gilles
Perron and the appellant's brothers-in-law.
[10]
The appellant did not
challenge the fact she is related to the payor within the meaning of the Income
Tax Act.
[11]
Regarding the
application of paragraph 5(3)(b), the principles are well established.
[12]
In Lavoie v. M.N.R., Bédard J.
summarized the role of the Court at paragraphs 7 to 9:
7 The Federal Court of Appeal has repeatedly defined the
role conferred on Tax Court of Canada judges by the Act. That role does not
permit the judge to substitute his or her discretion for the Minister's, but
does involve an obligation to "verify whether the facts inferred or relied
on by the Minister are real and were correctly assessed having regard to the context
in which they occurred, and after doing so, . . . decide whether the
conclusion with which the Minister was "satisfied" still seems
reasonable" (see Légaré v. Canada (Minister of National Revenue -
M.N.R.), [1999] F.C.J. No. 878 (QL), at
paragraph 4).
8 In other words, before deciding whether the Minister's
conclusion still seems reasonable to me, I must verify, in light of the
evidence before me, whether the Minister's allegations are in fact correct,
having regard to the factors set out in paragraph 5(3)(b) of the Act. At
issue, then, is whether appellant Lavoie and the payer would have entered into
a substantially similar contract of employment if they had been dealing with
each other at arm's length.
9 Appellant Lavoie had the burden of proving that the
Minister did not exercise his discretion in accordance with the principles that
apply in this regard, essentially, that the Minister did not examine all of the
relevant facts or failed to have regard to all of the facts that were relevant.
[13]
As a result, having
heard all the evidence, I must decide whether the Minister's finding that the
payor and a person with an arm's length relationship would not have entered
into a substantially similar contract is still reasonable.
[14]
In rendering his
decision, the Minister relied on the following presumptions of fact:
[translation]
(a) the payor was incorporated on October 15,
1987;
(b) the payor operated a moose hunting and speckled
trout outfitting business in Baie Sainte-Catherine;
(c) the payor had 8 cottages that could lodge
up to 30 individuals when full;
(d) the payor operates from May 20 to
September 25 and during the moose hunting season;
(e) the payor does not participate in outdoor
shows because 75% of its clients return every year;
(f) the payor is a member of the Fédération
des pourvoyeurs, which requires that it have an on‑site guardian;
(g) the payor's phone number on the
advertising flyers corresponds to that of the appellant;
(h) Gilles Perron works outside the region and
helps out at the outfitting business by making repairs when he is there;
(i) Jean-Marc Carré and Claude Poulin help
occasionally;
(j) André Perron is the payor's guardian; he
takes care of the fishing clients and makes repairs during the payor's period
of activity;
(k) the payor's cheques can be signed by Gilles
Perron and the appellant;
(l) the appellant has worked for the payor
for 23 years;
(m) the appellant's duties are to welcome and
register the clients, clean the cottages after each departure with André
Perron, do the bookkeeping, pay accounts and remit source deductions;
(n) the payroll journal was kept by André
Perron's wife, but all the payor's cheques were written by the appellant;
(o) the appellant's work schedule is variable
depending on the payor's operational needs, to a total of 45 hours per week;
(p) the hours worked by the appellant were not
recorded;
(q) the appellant was paid a fixed weekly
salary;
(r) during the period in question, the
appellant's pay for the 18 weeks was paid to her in three instalments;
(s) in 2008 the appellant's salary was reduced
by $65 a week, from $425 to $360 with no change in the employment conditions;
(t) this reduction in the appellant's salary
was allegedly caused by the payor's lack of money, but the employment records
issued by the payor to the appellant show that the weeks worked went from 15 to
18 in 2008 and that the total compensation did not change;
(u) according to the different accounts given
by the appellant, she worked either 50 hours or 40 hours, whereas the payor's
shareholder stated she worked 35 hours;
(v) in February 2009, the appellant took out a
line of credit for $25,000 in her name, but for the payor's benefit because the
personal interest rate is lower than the commercial rate;
(w) in October 2010 the balance on the line of
credit was $20,400;
(x) the monthly payments for this line of
credit are $200 and the appellant paid $1,400 of this between March 2009 and
September 2010;
(y) during the period in question, the
appellant prepared 74 cheques while between October 2009 and May 2010 she
prepared 81 with no compensation;
(z) a worker with an arm's length relationship
would not agree to work for no compensation or with a reduced salary and
increased weeks of work for the same duties;
(aa) a worker with an arm's length relationship
would not have accepted a reduced weekly salary with no change in employment
conditions.
[15]
Gilles Perron, Lily
Leblond, the appellant's sister, the appellant and Lucie Asselin, rulings
officer for the Canada Pension Plan and employment insurance, testified.
[16]
Since 1990, Ms. Leblond
had been doing the bookkeeping and preparing the payroll journal for free to
help her sister.
[17]
Among the exhibits
submitted was the CPT110 form, "Report on Appeal."
[18]
Although there were
small discrepancies, there was never really an issue of credibility.
[19]
The appellant and her
son were the company's two employees. The other shareholders had jobs outside
the outfitting business, but they worked there occasionally when they were not
at their other jobs; they were not hired employees when they did work for the
outfitting business.
[20]
At the beginning, the
work was divided between them such that the appellant did all the interior work
and her son did all the exterior work. The appellant's work included all the
office work—welcoming clients, answering the phone, signing cheques, etc.—and
cleaning the cottages. She was paid $425 per week.
[21]
In 2008, the appellant
had an operation and, during that year, she could not do all the work she used
to do, in particular cleaning the cottages.
[22]
As a result, in 2008,
the appellant's salary was reduced to $360 per week and Céline Bouchard was
hired at $360 per week to clean the cottages. Ms. Bouchard was not a
family relation.
[23]
After 2008, the
appellant completed her convalescence and returned to her duties but her salary
did not increase. However, her son started to help by doing some of her tasks
and her son's salary increased.
[24]
The appellant's total
compensation in 2009 and 2010 was slightly higher than her compensation in
2007, because she worked 18 weeks in 2009 and 2010, whereas she worked 15 weeks
in 2007 and 2008.
[25]
I have no doubt that
the appellant worked hard and made a significant contribution to the company.
[26]
Although the appellant
managed to show that certain presumptions of fact on which the Minister relied
were false,
there are still some elements that, when considered together, are not
consistent with a contract the company would have entered into if there had
been an arm's length relationship with the employee.
[27]
These elements are:
(a) The fact that during
the entire period of May 23 to September 25, 2010, the appellant was only paid
three times. Normally we expect an employee to be paid every week, every two
weeks or every month.
(b) The fact that nobody
kept track of her hours.
(c) The fact the appellant
earned less than minimum wage.
During the period, she earned $8 an hour whereas minimum wage was $9 an hour.
(d) Aside from the fact
her salary was below minimum wage, it is clear that the $360 per week was not
established in the same way as a salary that is negotiated with a third party
with an arm's length relationship with essentially similar working conditions.
It is also clear that the salary is not substantially similar to the salary
that would be paid to a third party with an arm's length relationship.
[28]
I must note that
certain elements, taken individually, are not necessarily incompatible with a
contract between persons with an arm's length relationship, but taken as a
whole, they are incompatible with a contract between persons with an arm's
length relationship and for this reason, I cannot find that the Minister's
decision is unreasonable.
[29]
Regrettably, I must
dismiss the appeal.
Signed at Ottawa, Ontario, this 31st
day of January 2012.
"Gaston Jorré"
Translation certified true
on this 15th day
of February 2012.
Elizabeth Tan,
Translator
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