[OFFICIAL ENGLISH TRANSLATION]
Date: 20020910
Docket: 2000-5201(EI)
BETWEEN:
LAITERIE LAMOTHE ET FRÈRES LTÉE,
Appellant,
and
THE MINISTER OF NATIONAL REVENUE,
Respondent,
and
FRÉDÉRIC BUREAU, DANIEL DESROSIERS,
MARIO LABONTÉ,
CLAUDE RENAUD, JOCELYN ROBIDOUX, JEAN-YVES
BRETON,
Interveners.
REASONS FOR JUDGMENT
Somers, D.J.T.C.C.
[1] This appeal was heard at
Montréal, Quebec, on July 16, 2002.
[2] On September 2,
October 22, October 29 and November 4, 1999,
as a result of requests by the Department of Human Resources
Development Canada, an authorized officer of the Canada Customs
and Revenue Agency determined that the appellant's employees
involved in the distribution of dairy products held insurable
employment.
[3] On November 30, 1999, the
appellant appealed the determination of the Minister of National
Revenue ("the Minister") concerning the distribution
employees.
[4] On March 30, 2000, the
Minister informed the appellant of his decision that the
employment of Jean-Yves Breton,
Frédéric Bureau, Daniel Desrosiers,
Mario Labonté, Claude Renaud and
Jocelyn Robidoux was insurable because it met the
requirements for a contract of service; there was therefore an
employer-employee relationship between the appellant and
those employees.
[5] The appellant did not appeal the
Minister's decision of March 30, 2000, to the
Court, and that decision on the insurability of the employment is
not at issue in these proceedings.
[6] By notices of assessment dated
June 9, 2000, the Minister assessed the appellant:
- in respect of
1998, for $29,312.77 in unpaid employee's and employer's
employment insurance premiums and $3,935.00 in interest, minus a
credit of $18,915.20, for a total of $14,332.57 for
13 employees, the workers;
- in respect of
1999, for $17,541.92 in unpaid employee's and employer's
premiums and $697.00 in interest, for a cumulative total of
$32,571.49 for 10 employees; and
- in respect of
2000, for $4,800.00 in unpaid employer's premiums and $90.00
in interest, for a cumulative total of $37,461.49.
[7] On June 27, 2000, the
appellant asked the Minister to reconsider the assessments of
June 9, 2000.
[8] By letter dated
October 3, 2000, varied on March 1, 2001, the
Minister informed the appellant that a decision had been made to
confirm the assessments for 1998, 1999 and 2000 on the ground
that the workers held insurable employment because there was an
employer-employee relationship between the appellant and
the workers.
[9] By Notice of Appeal filed in this
Court on December 28, 2000, the appellant appealed the
Minister's decision of October 3, 2000, which was
varied on March 1, 2001.
[10] Subsection 5(1) of the Act
reads in part as follows:
5.(1) Subject to subsection (2), insurable employment is
(a)
employment in Canada by one or more employers, under any express
or implied contract of service or apprenticeship, written or
oral, whether the earnings of the employed person are received
from the employer or some other person and whether the earnings
are calculated by time or by the piece, or partly by time and
partly by the piece, or otherwise;
. . .
[11] The burden of proof is on the
appellant, which must show on a balance of probabilities that the
Minister's decision is unfounded in fact and in law. Each
case turns on its own facts.
[12] In making the assessments, the Minister
relied on the following assumptions of fact set out in
paragraph 13 of the Amended Reply to the Notice of
Appeal:
[TRANSLATION]
(a) the appellant
manufactured and distributed dairy products;
(b) the appellant
hired the workers as distributors;
(c) at the start of
their day, the workers loaded dairy products at the
appellant's place of business;
(d) at the end of
the day, the workers came to store the remaining products in a
refrigerated room at the appellant's place of business;
(e) the workers gave
the appellant a report on the day's sales and ordered
products for the next day;
(f) on the
basis of the sales reports, the appellant provided a weekly
report concerning each worker's account;
(g) the workers had
a logbook that was given to the appellant so that it could
replace them on the days they were absent;
(h) the workers had
to sell the appellant's products exclusively;
(i) the
appellant set the sale prices for the products;
(j)
(removed)
(k) the appellant
billed the major customers directly, and they paid the appellant
directly for the products distributed by the workers;
(l) the
workers did account collection for the small businesses;
(m) the appellant could
establish the workers' earnings by the difference between the
purchase cost and the sale price of the products sold;
[13] The only issue is whether the
assessments at issue for 1998, 1999 and 2000 are valid; the
workers' insurability is not in dispute.
[14] During his testimony at the hearing,
Jean-Yves Breton, one of the workers and interveners,
stated that he had worked for the appellant from 1976 to 2002. In
1993, he signed a contract of employment with the appellant, and
a sample of that contract was filed as Exhibit I-1.
The workers/distributors purchased the appellant's products
at a price set by the appellant. They sold the products to
businesses and private residences; 35 percent of the total
sales were made to businesses and 65 percent to private
residences.
[15] At the start of the day, the
distributors loaded products at the appellant's place of
business. In the evening, they gave the appellant a load sheet
showing the quantity of products they wanted for the next day,
and the appellant's employees prepared those products for the
next day.
[16] The appellant set the purchase price of
the products sold to the distributors and the sale price for
consumers. Jean-Yves Breton explained that he
could sell the products to private homes for less than the price
set by the appellant but that businesses had to pay the price set
by the appellant.
[17] With respect to the earnings from the
residential sales, the witness explained that he kept the money
without reporting on it to the appellant. He added that, if a
customer did not pay a bill, the distributor was the one who
incurred the loss. As for the earnings from the business sales,
the distributors invoiced the customers and gave the appellant
the invoices. When from time to time the distributors collected
money from the merchants, they filled out a bank slip and gave it
to the appellant along with the money collected. If certain
products were returned, the distributors were given a credit for
them. The distributors gave the appellant a weekly report on
returns and on wholesale and retail sales.
[18] Martin Langlois, the appellant's
chief financial officer, corroborated
Jean-Yves Breton's testimony. He explained that
the appellant could not know about the cash sales, whether
wholesale or retail; the distributors kept the difference between
the price paid to the appellant for the products and the price
paid by the customers. The distributors were not required to
report to the appellant on the amount of their income.
[19] The appellant did not pay the workers
(distributors) by cheque but credited them the difference in the
amounts owed. The witness added that, since the appellant was
assessed, the purchase and sales records have been more complete
and, as a result, source deductions, such as employment insurance
premiums, are made in accordance with the statutory
requirements.
[20] Claude Renaud, a distributor for the
appellant, stated that he had not received any cheques from the
appellant in 1998. On this point, he filed as
Exhibit A-2 hisincome tax notice of reassessment,
which shows $76,708 as his [translation] "total income
- adjusted amount". The witness could not explain whether
that figure was accurate and said that he relied on his
accountant.
[21] Nicole Villeneuve, an auditor with the
Canada Customs and Revenue Agency, explained how she had been
able to determine the amount of the unpaid employee's and
employer's employment insurance premiums. During her
investigation, she checked the data with the appellant's
supervisor and controller and with the workers (distributors).
The appellant was unable to provide her with the workers'
gross income. She also examined the weekly, monthly and yearly
reports prepared by the distributors and the distributors'
tax returns. On the basis of that information, she established
the amount of the premiums as set out in paragraph 13 of the
Amended Reply to the Notice of Appeal.
[22] Counsel for the appellant acknowledged
that the workers/distributors whose names are on a list appended
to the Reply to the Notice of Appeal held insurable employment
with the appellant because there was an employer-employee
relationship between the parties. The employment was insurable,
and the appellant made the necessary deductions. The distributors
purchased the appellant's products and, if some products were
returned, they were credited for the amounts in question. The
appellant did not know how much cash the distributors collected
from the customers, and the distributors were not required to
provide the appellant with their total income from sales to
customers.
[23] Counsel for the appellant argued that
it was impossible for the appellant to determine the workers'
income. He also argued that the auditor, Nicole Villeneuve,
could not base the assessments on the information obtained or on
the workers' tax returns. He used the following legal maxim
to support his argument: "no one is bound to do the
impossible".
[24] Relying on decisions by the courts,
including the Supreme Court of Canada, counsel for the Minister
argued that the Act must be interpreted broadly to
guarantee that people who hold insurable employment will benefit
from the Act when they lose their jobs; the Act
must therefore be applied so as to achieve its intended
purpose.
[25] In its Notice of Appeal, the appellant
argued:
[TRANSLATION]
. . . the employer cannot owe an amount for 1998-99 that
it could not collect because it was unaware of the insurability
of the employment held by the agents/distributors and, above all,
because making such deductions to pay the employee's premiums
was impossible in fact and in law given the
purchaser-vendor situation between the employer and the
agents/distributors.
[26] On November 30, 1999, the appellant
asked the Minister to rule on the insurability of the employment
of the workers/distributors. It was not until
March 30, 2000, that the Minister determined that the
employment was insurable. The Minister has the power to claim all
the premiums payable under the Act from the employer.
[27] It was possible for the appellant in
this case to determine the income of the workers/distributors.
The controller kept some control over all purchases and over the
business sales; owners of commercial establishments were billed
for purchases of the appellant's products. Only the sales
made by the workers that were paid for in cash were not recorded
by the controller. The appellant could have done that type of
accounting; in fact, it now does.
[28] The facts in Mangat v. Canada
(Minister of National Revenue - M.N.R.), [2000] F.C.J.
No. 1464, were analogous to those of this case. In its
decision dated September 11, 2000, the Federal Court of
Appeal stated the following at paragraph 29:
Clearly, the words "paying remuneration" should not
be read so narrowly so as to exclude the situation at issue in
this case. The drivers are "rewarded" for their work as
they keep a certain portion of the day's earnings.
Interpreting the words "paying" and
"remuneration" broadly it becomes clear that this is
the effect of the arrangement between the Applicants and the taxi
drivers.
The appellant therefore had to deduct the employee's
premiums from the employees' remuneration.
[29] Section 66 of the Act
provides:
The Commission shall, with the approval of the Governor in
Council on the recommendation of the Minister and the Minister of
Finance, set the premium rate for each year at a rate that the
Commission considers will, to the extent possible,
(a) ensure that there will be enough revenue over a
business cycle to pay the amounts authorized to be charged to the
Employment Insurance Account; and
(b) maintain relatively stable rate levels throughout
the business cycle.
[30] Subsection 82(1) of the Act
reads as follows:
Every employer paying remuneration to a person they employ in
insurable employment shall
(a) deduct the prescribed amount from the remuneration
as or on account of the employee's premium payable by that
insured person under section 67 for any period for which the
remuneration is paid; and
(b) remit the amount, together with the employer's
premium payable by the employer under section 68 for that period,
to the Receiver General at the prescribed time and in the
prescribed manner.
[31] Section 2 of the Insurable Earnings
and Collection of Premiums Regulations reads in part as
follows:
2.(1) For the purposes of the definition "insurable
earnings" in subsection 2(1) of the Act and for the
purposes of these Regulations, the total amount of earnings that
an insured person has from insurable employment is
(a) the total of all amounts, whether wholly or partly
pecuniary, received or enjoyed by the insured person that are
paid to the person by the person's employer in respect of
that employment, and
(b) the amount of any gratuities that the insured person
is required to declare to the person's employer under
provincial legislation.
[32] Under section 2 above, the
workers/distributors in this case received remuneration from the
appellant as employees.
[33] In Mangat, supra, the
Federal Court of Appeal stated the following at paragraph 26:
The simple fact that the drivers give money to the employer
and not vice versa does not mean that the driver is not being
paid remuneration. The actual way in which the driver receives
payment is immaterial. It is a fact that the money collected by
the driver belongs to the owner of the vehicle. The driver can
only keep that which he/she is entitled to according to the
agreement with the owner. In theory this relationship is the same
as the more traditional employment arrangement. The employee
generates money for the employer and the employer returns a
certain portion of that money to the employee as remuneration for
services rendered. In the case at bar the parties have simply
skipped the step of turning over all the money to the employer
only to have the employer turn around and give a portion back to
the drivers. Taxi drivers simply keep their portion, as per their
agreement with the employer. This does not negate the fact that
the drivers are being remunerated for their work.
[34] The appellant argued that the Minister
could not make the assessments either since the data obtained by
the auditor, Nicole Villeneuve, from the appellant's
managers and the workers, that is, the weekly, monthly and yearly
reports and the workers' tax returns, were not complete.
However, the burden was on the appellant to prove that the
figures are wrong.
[35] Subsection 85(1) of the Act
reads as follows:
The Minister may assess an employer for an amount payable by
the employer under this Act, or may reassess the employer or make
such additional assessments as the circumstances require, and the
expression "assessment" when used in this Act with
reference to any action so taken by the Minister under this
section includes a reassessment or an additional assessment.
[36] The appellant did not introduce in
evidence any new facts that would change the assessment made by
the Minister. The appellant argued that it did not pay the
workers any wages: no amount was paid to the workers since they
kept the difference between the purchase price and the sale price
of the products.
[37] In Canadian Pacific Limited v.
Attorney General of Canada (Minister of National Revenue),
[1986] 1 S.C.R. 678, the Supreme Court of Canada stated the
following:
The interpretation I have given to "insurable
earnings" is consistent with the purpose of the Act, which
is to pay, to persons who have lost their employment, benefits
calculated in terms of a percentage of their insurable earnings.
Otherwise, an employee who received a good part of his earnings
as tips would not benefit to the same degree as his colleagues
who receive the whole of their earnings directly from the pocket
of their employer. By adding to the definition of remuneration a
whole series of benefits an employee receives by reason of his
employment, the regulations clearly indicate that the expression
should be given a broad interpretation. Moreover, as noted, a law
dealing with social security should be interpreted in a manner
consistent with its purpose. We are not concerned with a taxation
statute. The cases of Penn v. Spiers & Pond Ltd. and
Great Western Railway Co. v. Helps . . .
are merely examples of the principle that I have just stated.
[38] The employment of the
workers/distributors was declared insurable, and the appellant
therefore had an obligation to collect the premiums and remit
them to the Minister. The workers cannot be deprived of
employment insurance benefits because of the employer's
failure to collect the premiums. The Minister made the
assessments at issue in accordance with the provisions of the
Act.
[39] The appeal is dismissed and the
assessments are confirmed.
Signed at Ottawa, Canada, this 10th day of September 2002.
Cases consulted
Université Laval v. Canada (Minister of National
Revenue - M.N.R.), [2002] F.C.J. No. 660 (F.C.A.)
(Quebec); Fédération des caisses populaires de
Montréal et de l'Ouest du Québec v. Canada,
[2001] F.C.J. No. 266 (F.C.A.) (Quebec); Hutton v. Canada
(Minister of National Revenue - M.N.R.), [1999] T.C.J.
No. 655 (T.C.C.) (Newfoundland);
Pierre-André Côté, The
Interpretation of Legislation in Canada, 2nd edition;
Mangat v. Canada (Minister of National Revenue -
M.N.R.), [2000] F.C.J. No. 1464 (F.C.A.) (British
Columbia); Canadian Pacific Limited v. Attorney General of
Canada, [1986] S.C.J. No. 30 (S.C.C).
D.J.T.C.C.
Translation certified true
on this 15th day of December 2003.
Sophie Debbané, Revisor
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