Citation: 2013TCC374
Date: 20131127
Docket: 2012-1640(EI)
BETWEEN:
JACQUELINE THÉRIAULT,
Appellant,
and
THE MINISTER OF NATIONAL REVENUE,
Respondent.
[OFFICIAL ENGLISH
TRANSLATION]
REASONS FOR JUDGMENT
Paris J.
[1]
Ms. Thériault is
appealing from the decision by the Minister of National Revenue (the Minister)
that Raymond Bernier's employment of from June 3, 2010, to June 10, 2011, at the sugar bush owned and
operated by Ms. Thériault was not insurable employment under the Employment
Insurance Act (the Act).
[2]
The
Minister decided that Mr. Bernier's employment was excluded under paragraph 5(2)(i)
of the Act, which states that employment if the employer and employee are not
dealing with each other at arm's length is not insurable employment. It was not
challenged that Ms. Thériault and Mr. Bernier were not dealing with each other at arm's
length, since Mr. Bernier is Ms. Thériault's husband.
[3]
Paragraph
5(2)(i) states:
(2) Insurable employment
does not include
...
(i) employment if the employer and
employee are not dealing with each other at arm’s length.
[4]
When applying paragraph 5(2)(i), the Minister must take into account the
exception set out in paragraph 5(3)(b) of the Act whereby if the Minister
is satisfied that such employment would have existed with similar working
conditions between parties with an arm's length relationship, then the
employment is insurable.
[5]
Paragraph
5(3)(b) of the Act states:
5(3) For the purposes of
paragraph (2)(i),
...
(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]
In this
case, after reviewing the circumstances of Mr. Bernier's employment, the
Minister concluded that it was not reasonable to find that Ms. Thériault and
Mr. Bernier would have entered into a substantially similar contract of
employment if they had been dealing with each other at arm's length.
[7]
The role of the Tax
Court of Canada when considering a discretionary decision by the Minister under
paragraph 5(3)(b) of the Act has been the subject of many decisions, in
particular by the Federal Court of Appeal. The comments by Justice Létourneau
in Livreur Plus Inc. v. Canada clearly
define the role of this Court in cases regarding employment insurance:
12. As already mentioned, the
Minister assumed in support of his decision the existence of a number of facts
obtained by inquiry from workers and the business he considered to be the
employer. Those facts are taken as proven. It is for the person objecting to
the Minister's decision to refute them.
13. The function of a Tax
Court of Canada judge hearing an appeal from the Minister's decision is to
verify the existence and accuracy of those facts and the assessment of them by
the Minister or his officials, and after doing so, to decide in light of that
whether the Minister's decision still seems to be reasonable: Légaré v.
Canada (Minister of National Revenue - M.N.R.), [1999] F.C.J. No. 878; Pérusse
v. Canada (Minister of National Revenue - M.N.R.), [2000] F.C.J. No. 310; Massignani
v. Canada (Minister of National Revenue - M.N.R.), 2003 FCA 172; Bélanger
v. Canada (Minister of National Revenue - M.N.R.), 2003 FCA 455. In fact,
certain material facts relied on by the Minister may be refuted, or the view
taken of them may not stand up to judicial review, so that because of their
importance the apparent reasonableness of the Minister's decision will be
completely destroyed or seriously undermined.
14.
In exercising this function the judge must accord the Minister a certain measure
of deference, as to the initial assessment, and cannot simply substitute his
own opinion for that of the Minister unless there are new facts or evidence
that the known facts were misunderstood or wrongly assessed: Pérusse v.
Canada (Minister of National Revenue - M.N.R.), supra, paragraph 15.
[8]
As Justice Campbell
summarized in Porter v. Canada (Minister of National Revenue–M.N.R.): "...
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 the findings of fact by
this Court. This assessment should accord a certain measure of deference to the
Minister."
[9]
Therefore, the only
issue is to determine whether, in light of all the facts, the Minister's
decision rendered pursuant to paragraph 5(3)(b) seems reasonable.
[10]
The facts relied upon
by the Minister to render his decision are listed at paragraph 6 of the
Modified Reply to the Notice of Appeal, and state the following:
[translation]
a.
since 1978, the appellant has been the
sole owner of a sugar bush that she operates; (admitted)
b.
the sugar
bush has 2,000 taps and a woodlot; (admitted)
c.
the
appellant bought maple sap from a neighbouring lot that had 3,000 taps, which
brought the amount of sap to boil to 5,000 taps; (admitted)
d.
the
appellant sells in bulk to La Citadelle, her main client; (admitted)
e.
the sugar
bush is a seasonal business, whose maple-related work begins around February
and ends around May, followed by cleanup and woodcutting; (denied)
f.
until two
years ago, the appellant took care of the transformation of sap into maple
products and her husband [Mr. Bernier], took care of cutting the wood used for
the fires that boil the sap; (denied)
g.
until two
years ago, [Mr. Bernier] was not paid when he cut the wood for the appellant,
which he did during the evenings and weekends since he worked elsewhere as a
mechanic; (admitted)
h.
as of
2010, because the appellant was taking care of her daughter's child, [Mr. Bernier]
took care of all the work at the sugar shack, including the woodcutting; (admitted)
i.
[Mr.
Bernier]'s duties were to tap the trees, collect tubes, pump machines and store
the sap, repair (sic) the sap through boiling and evaporation, filter the syrup
and put it into barrels; in short, [Mr. Bernier] did all the work related to
the sugar bush and when the barrels were stored, he would clean the tubes and
then begin cutting wood for the following year (admitted)
j.
[Mr.
Bernier] did not have a schedule to keep because his hours of work were
dependent on the weather and the sap flow; (denied)
k.
the hours
[Mr. Bernier] worked were not recorded; (denied)
l.
[Mr.
Bernier] had experience with sugar bush work; (admitted)
m.
[Mr.
Bernier]'s work was not supervised, and he did not have to report to the
appellant because the work he performed was ascertainable; (denied)
n.
the
appellant and [Mr. Bernier] together decided that his hourly rate would be $10;
(denied)
o.
[deleted]
p.
[Mr.
Bernier]'s pay was based on 50 hours of work per week when he performed work
directly related to the sugar bush and when he cut wood; (denied)
q.
[Mr.
Bernier] received gross compensation of $500 per week regardless of the hours
actually worked; (denied)
r.
at times,
as [Mr. Bernier] admitted, his pay was delayed; (denied)
s.
a review
of the paycheques shows that [Mr. Bernier] either received his cheques late or
in bulk, often in sequence; (denied)
t.
[Mr.
Bernier] did not receive any benefits, vacation pay or 4% during layoffs; (admitted)
u.
[Mr.
Bernier] performed his duties for a period of 21 weeks in 2010 as opposed to 7
weeks in 2011. (denied)
[11]
The appellant admitted
there was no arm's length relationship within the meaning of paragraph 5(2)(i)
of the Act, but she claims the exception under paragraph 5(3)(b) renders
Mr. Bernier's employment insurable.
[12]
The appellant submits
that she decided to hire an employee because she had to take care of her
daughter's children, who lived in Lac‑Beauport. Since Mr. Bernier had
lost his previous job and had experience in the maple industry, the appellant
hired him. The appellant stated that if Mr. Bernier had not been available to
do the work, she would have hired another employee. The appellant feels that
the Minister's finding that Mr. Bernier's employment is not insurable is a
wrongful exercise in facts and in law of his discretionary power.
[13]
The appellant claims
that Mr. Bernier enjoys compensation and working conditions that conform to those
in the maple industry and the pay rate is reasonable for the seasonal work of
the maple industry.
[14]
Specifically, the
appellant claims that although no exact record was kept of Mr. Bernier's hours
of work, she did control his hours of work by talking with Mr. Bernier
every evening on the phone and going to the sugar bush every weekend. According
to the appellant, the work performed is ascertainable and she can assess the
number of hours Mr. Bernier actually worked because she herself performed these
same duties for many years.
[15]
The appellant claims
that the sap flow varies a great deal and this is why Mr. Bernier's
schedule fluctuated from week to week. The 50-hour work week represents an
average and if Mr. Bernier worked less one week, he would make up the
hours the following week.
[16]
The respondent claims
that it is hard to accept that the missing hours of work would actually be made
up in the subsequent weeks unless there was an effective accounting of the
hours of work, that the hours of work for each week were not recorded by
Ms. Thériault and Mr. Bernier, and that unrelated parties, acting in
their own interests, would have insisted on accurate weekly accounting.
[17]
I do not agree with the
respondent. Although Ms. Thériault did not have a record of Mr. Bernier's
hours of work, I accept that she was in a good position to know whether the
work was done or not and, as such, she controlled the work carried out by
Mr. Bernier. I also feel that Mr. Bernier was paid for a 50‑hour
work week, namely $500, even though these hours could vary from week to week, but
this is not because there was no arm's length relationship. I accept
Mr. Bernier's and Ms. Thériault's uncontradicted testimony to the
effect that Mr. Bernier worked an average of 50 hours per week, which
makes his compensation reasonable. This situation is similar, in part, with
regard to hours of work and compensation to Théberge v. Canada, in which
the applicant worked 40 to 80 hours per week for a set salary and his hours
were not recorded. The Federal Court of Appeal decided that these factors were
not sufficient to find that there was no arm's length relationship because the
applicant's salary was established based on an average of 60 hours of work per
week.
[18]
The appellant also
denies that she paid Mr. Bernier late or gave him his cheques in bulk. She
stated that he gave him his paycheques weekly, that he cashed them in bulk. The
appellant and Mr. Bernier testified that the appellant never paid late and
never instructed Mr. Bernier to wait before cashing his cheques. Moreover,
during the period in question, the appellant's bank account always had
sufficient funds to cover Mr. Bernier's pay. Mr. Bernier testified
that the appellant paid all the expenses related to the cottage at the sugar
bush where he lived, such that he only had to pay for food. Thus,
Mr. Bernier claims that he simply did not need this money to support
himself.
[19]
During her testimony,
the appellant explained that the reason the paycheques frequently had
consecutive numbers was simply because she did not write any other cheques in
between these paycheques.
[20]
In my opinion,
Ms. Thériault's and Mr. Bernier's testimony is sufficient for me to
conclude that the cheques were not prepared in bulk and there was no delay in
the payment of Mr. Bernier's salary. The copies of the statements produced
by Ms. Thériault clearly show that she had the funds necessary to pay
Mr. Bernier at all times. Therefore, she would have no reason to delay his
paycheques.
[21]
The respondent claims
that Mr. Bernier's work periods were highly influenced by the non-arm’s length relationship
between the appellant and Mr. Bernier. Whereas the appellant claims it was
she who established Mr. Bernier's periods of employment, the Minister
feels that they were determined by Mr. Bernier based on the depletion of
his employment insurance benefits.
[22]
However, according to
an analysis by the respondent submitted as Exhibit I-1, tab 3, when Mr. Bernier
started working for the appellant in February 2010, his employment insurance
benefits had not been exhausted. Moreover, from February to May 2010, he worked
700 hours for the appellant although he only needed 490 hours of work to
re-qualify for benefits. Additionally, he still had benefits when he began
working for the appellant again in November 2010. Lastly, the appellant also
showed that the Minister erred in presuming that Mr. Bernier only worked 7
weeks in 2011 as opposed to 21 weeks in 2010. The 7 weeks in 2011 only takes
into consideration the weeks during the period in question, which ends on June
10, 2011. However, Mr. Bernier went back to work on November 1, 2011.
Therefore, it was not 7 weeks but 14 that Mr. Bernier worked in 2011. All
these elements convince me that Mr. Bernier's periods of work corresponded
to the needs of Ms. Thériault's business.
[23]
Ms. Thériault also
successfully showed that Mr. Bernier's hourly rate roughly complied with
applicable standards. The respondent did not challenge that the hourly rate of
workers in the maple industry was between $10 and $15 in 2010, but claims that
Mr. Bernier did not receive vacation pay of 4% of his gross pay.
Mr. Bernier and Ms. Thériault both testified that the hourly rate of
$10 included the vacation pay and I accept this testimony.
[24]
The respondent also noted
that Mr. Bernier had worked for Ms. Thériault without pay before the
period in question and after the sugaring season in 2010. The evidence showed
that Mr. Bernier and his son-in-law voluntarily cut around 45 cords of
wood for Ms. Thériault in the years before 2010. Mr. Bernier allegedly
also cut wood on a smaller scale during the summer of 2010. The issue is
whether this volunteer work is relevant in this case. In Théberge, the
Federal Court of Appeal stated at paragraph 19:
What a claimant does outside the period during which he or she is
employed in what the Minister considers to be insurable employment can be
relevant, for example, to verify that the claimant is unemployed, to determine
the amount of his or her benefits, or to establish his or her period of
unemployment. However, for the purposes of the exception provided in paragraph
3(2)(c) of the Act, what a claimant does outside of his or her period of
employment will be of little relevance when, as in this case, it is not alleged
that the salary paid during the period of employment took into account the work
performed outside of that period, that the applicant had included, in the hours
spent on his or her insurable employment, hours worked outside of the period,
or that work performed outside of his or her period of employment had been
included in the work performed during his or her period of employment. It seems
to me to be self-evident, and this is confirmed by the evidence, that in the
case of family businesses engaged in seasonal work, the minimal amount of work that
remains to be done outside the active season is usually performed by family
members, without pay. Excepting seasonal employment, in a family farm business,
on the ground that cows are milked year-round amounts, for all practical
purposes, to depriving family members who qualify by working during the active
season of unemployment insurance and to overlooking the two main
characteristics of such a business: that it is a family business and a seasonal
business.
[25]
In my opinion, these
principles apply in the present case because Ms. Thériault's business is a
seasonal family business and the work Mr. Bernier performed without pay
was neither continuous nor significant. Before 2010, he cut wood during his
free time after his work elsewhere and with the help of his son-in-law. As for
the period after May 2010, it seems the amount of work performed was very
limited because he did most of the woodcutting in November and December that
year. Since the respondent is not claiming that the salary paid to
Mr. Bernier during the period of employment took into consideration this
work performed outside the period or that the work performed or hours worked
outside this period were included in any way in the work during the period of
employment, I find that the work performed outside his period of employment is
not relevant.
[26]
For all these reasons,
after reviewing all the evidence, the Minister's finding in this case does not
seem reasonable to me. Ms. Thériault convinced me that she would have
entered into a substantially similar contract with a person with whom she had
an arm's length relationship. The appeal is therefore allowed and the
Minister's decision is vacated on the ground that, during the period in
question, Mr. Bernier held insurable employment.
Signed at Ottawa,
Canada, this 27th day of November 2013.
"B. Paris"
Translation
certified true
on this 9th day of
January 2014.
Elizabeth Tan,
Translator
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