Dockets: 2011-485(EI)
BETWEEN:
EWA KRAWCZYK,
Appellant,
and
THE MINISTER OF NATIONAL REVENUE,
Respondent.
____________________________________________________________________
Appeal
heard on October 27, 2011, at London, Ontario
Before: The Honourable
Justice Wyman W. Webb
Appearances:
|
For the Appellant:
|
The
Appellant Herself
|
|
Counsel for the Respondent:
|
Tamara Watters
|
____________________________________________________________________
JUDGMENT
The Appellant’s appeal under the Employment
Insurance Act (the "EI Act") from the decision of the Respondent that the employment of the
Appellant by Lake Stars Corp. during the period from July 1, 2009 to July 31,
2010 was not insurable employment within the meaning of section 5 of the EI Act,
is dismissed, without costs.
Signed at Halifax, Nova
Scotia, this 3rd day of November 2011.
“Wyman W. Webb”
Citation: 2011TCC506
Date: 20111103
Dockets: 2011-485(EI)
BETWEEN:
EWA KRAWCZYK,
Appellant,
and
THE MINISTER OF NATIONAL REVENUE,
Respondent.
REASONS FOR JUDGMENT
Webb J.
[1]
The
issue in this appeal is whether the decision of the Respondent that the
employment of the Appellant by Lake Stars Corp. (the “Company”) during the
period from July 1, 2009 to July
31, 2010 was
not insurable employment for purposes of the Employment Insurance Act (the
"EI Act") was reasonable.
[2]
Subsection
5(2) of the EI Act provides in part that:
Insurable employment does not include
...
(i) employment if the employer and employee are not dealing
with each other at arm's length.
[3]
Subsection
5(3) of the EI Act provides that:
(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.
[4]
The
shares of the Company throughout the period in question were held by the
Appellant’s spouse. The Appellant and the Company were therefore related for
the purposes of the Income Tax Act as a result of the provisions of
paragraph 251(2)(b) of that Act and are deemed to not be
dealing with each other at arm’s length under paragraph 251(1)(a) of the
Income Tax Act. As a result the issue in this case is whether the
decision of the Minister of National Revenue that the Appellant and the Company
would not have entered into a substantially similar contract of employment for
the period in question if they would have been dealing with each other at arm’s
length, is reasonable.
[5]
In
the case of Porter v. M.N.R., 2005 TCC 364, Justice Campbell
of this Court reviewed the decisions of this Court and the Federal Court of
Appeal in relation to the role of this Court in appeals of this nature. In
paragraph 13 of this decision Justice Campbell stated as follows:
In summary, the function of this Court is
to verify the existence and accuracy of the facts relied upon by the Minister,
consider all of the facts in evidence before the Court, including any new
facts, and to then assess whether the Minister's decision still seems
"reasonable" in light of findings of fact by this Court. This
assessment should accord a certain measure of deference to the Minister.
[6]
The
Company operated a gas bar, convenience store and, commencing in September
2009, a restaurant. The business is located in Tobermory, Ontario. The Appellant stated
that there were two seasons in Tobermory – the high season from July 1 to the
Thanksgiving weekend and the off season which was the rest of the year. The
businesses were busy during the high season but there were not a lot of people
around during the off season and the businesses were not nearly as busy. During
the high season the businesses were open from 8:00 a.m. to 8:00 p.m. seven
days per week. During the off season the store and gas station were open about
four to five hours per day for five days a week until January 2010 and
then from 8:00 a.m. to 6:00 p.m. seven days per week. The Appellant stated that
during the first year the restaurant was also open but she did not recall the
hours that it was open. It seems more likely than not that for the first year
the restaurant was open for the same periods of time as the store and gas
station.
[7]
The
Appellant had various duties including:
(a)
operating
the cash register;
(b)
selling
groceries and lottery tickets;
(c)
renting
out movies;
(d)
pumping
gas and filling propane tanks;
(e)
cleaning
washrooms;
(f)
ordering
and receiving supplies;
(g)
bookkeeping;
(h)
preparing
and cooking food for the restaurant;
(i)
serving
food and beverages to customers of the restaurant; and
(j)
cleaning
the dishes and the restaurant premises.
[8]
The
duties related to the restaurant were performed after the restaurant opened in
September 2009. The Appellant stated that she was not paid for her bookkeeping
services.
[9]
It
seems to me that the most significant fact indicating that the Appellant and
the Company would not have entered into a substantially similar contract of
employment for the period in question if they would have been dealing with each
other at arm’s length, is the amount that the Appellant was paid. It seems
clear that during the high season the Company had other employees who were
dealing at arm’s length with the Company and that many of the duties that the
Appellant was performing were performed by these arm’s length employees during
the high season. These other workers were paid from $10.25 per hour to $15.00
per hour.
[10]
The Respondent
also introduced a printout from the website for Human Resources and Skills
Development Canada indicating wages for different jobs in 2009. For 2009, a
food and beverage server in the Stratford – Bruce Peninsula area could expect to earn from
$9.00 per hour (the low wage) to $12.00 per hour (the high wage) with the
average wage being $10.15 per hour. The low wage for cashiers in Ontario for 2009 was $10.25 per
hour and the high wage was $13.45 per hour. The low wage for service station
attendants in Ontario for 2009 was $10.25 per hour and the high wage was $15.00 per hour.
[11]
The
following table shows the amount that the Appellant was paid for each month
during the period under appeal:
|
Month
|
Amount Paid
|
Number of Hours Worked
|
Amount Paid per Hour
|
|
July 2009
|
$500
|
20
|
$25.00
|
|
August 2009
|
$1,000
|
40
|
$25.00
|
|
September 2009
|
$500
|
20
|
$25.00
|
|
October 2009
|
$500
|
20
|
$25.00
|
|
November 2009
|
$850
|
34
|
$25.00
|
|
December 2009
|
$1,000
|
66
|
$15.15
|
|
January 2010
|
$2,500
|
200
|
$12.50
|
|
February 2010
|
$2,500
|
200
|
$12.50
|
|
March 2010
|
$2,500
|
200
|
$12.50
|
|
April 2010
|
$3,000
|
120
|
$25.00
|
|
May 2010
|
$3,000
|
120
|
$25.00
|
|
June 2010
|
$4,000
|
160
|
$25.00
|
|
July 2010
|
$5,000
|
200
|
$25.00
|
[12]
The
Appellant’s hourly wage fluctuated from a low of $12.50 to a high of $25.00.
The Appellant’s explanation was that during the off season there was no one
available to work so she had to perform the jobs of more than one person. Her
rationale was that if the Company would have had to pay two employees $12.50
each per hour, then since she was doing the work that otherwise would have been
done by these two workers (for example pumping gas and looking after the store)
she should be paid $25.00 per hour. Even if I were to accept this explanation
(which I do not) it does not explain why she was paid $25.00 per hour during
the high season when there were other people available for work and when other
employees were working. Also, for three months during the off season (when
presumably she was doing the jobs that two other people would have done) she
was paid $12.50 per hour and for another month during the off season she was
paid $15.15.
[13]
It
does not seem to me that an employer, who is paying (during a slow time of the
year) one employee with whom the employer is dealing at arm’s length to perform
the tasks that during busier times of the year would be performed by two
persons, would add together the hourly rates for the two positions and pay that
person the aggregate hourly rate of the two positions. The employee can only be
in one place at one time. If the employee is pumping gas the employee cannot
also at the same time be serving customers in the store. It seems to me that a
more reasonable agreement could be that the employer would pay the higher of
the two rates of pay for each position or the average of the two rates of pay,
but not both rates of pay.
[14]
The
Appellant also indicated that she was acting as a manager. However she also
indicated that her husband made all of the decisions related to the business
and therefore it seems to me that her responsibilities as a manager were
minimal and would not justify her receiving $25 per hour when the other arm’s
length employees were being paid from $10.25 to $15.00 per hour.
[15]
It
seems to me that the significant fluctuations in the hourly wage paid to the
Appellant and the fact that for most months the Appellant was paid at least $10
more per hour than the other arm’s length employees and the amounts that other
workers in Ontario were receiving for similar positions, strongly indicate that
the Appellant and the Company would not have entered into a substantially
similar contract of employment for the period in question if they would have
been dealing with each other at arm’s length.
[16]
As a
result, the facts that were presented do not lead to a conclusion that the
Minister’s decision was unreasonable in determining that the terms and
conditions of employment would not have been substantially similar if the
Appellant and the Company would have been dealing with each other at arm’s
length. Therefore the appeal is dismissed.
Signed at Halifax, Nova Scotia this 3rd day of November 2011.
“Wyman W. Webb”
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