Citation:
2010 TCC 577
Date:
20101108
Docket: 2010‑524(EI)
BETWEEN:
RACHÈLE
G. BERNARD,
Appellant,
and
MINISTER
OF NATIONAL REVENUE
Respondent,
and
ALPHONSE
BERNARD C.A. INC.
Intervenor.
[OFFICIAL ENGLISH TRANSLATION]
REASONS FOR JUDGMENT
Bédard J.
[1]
The Appellant is appealing a decision by the
Minister of National Revenue (the Minister) under the Employment Insurance
Act (the Act). The Minister decided that the appellant did not hold an
insurable employment when she worked for Alphonse Bernard C.A. Inc. (the Payor)
during the period at issue, that is, from January 5, 2007, to May 1,
2009, finding that her employment was excluded because she and the Payor would
not have entered into a similar employment contract if they had been dealing
with each other at arm's length.
[2]
To make his decision, the Minister relied on the
following presumptions of fact found at paragraphs 5 and 6 of the Reply to
the Notice of Appeal, which were admitted or denied, depending on the case:
[TRANSLATION]
5. The Appellant is a person related
to the Payor with the meaning of the Income Tax Act for the following
reasons:
a.
the Payor's majority
shareholder was Alphonse Bernard with 70 percent of the voting shares,
while Claude Bernard had 25 percent of the voting shares and Hélène Lagacé
had 5 percent; (admitted)
b.
the appellant is
Alphonse Bernard's spouse and Claude Bernard's mother; and (admitted)
c.
the appellant is
related by marriage to a person who controls the Payor. (admitted)
6. The Minister determined that the
Appellant and the Payor were not dealing with each other at arm's length in the
context of this employment. In fact, the Minister was satisfied that it was not
reasonable to conclude that the appellant and the Payor would have entered into
a substantially similar contract of employment if they had been dealing with
each other at arm's length, in light of the following facts:
(a)
The Payor was
incorporated on January 1, 2004; (admitted)
(b)
The Payor's business
has existed since 1996, when Alphonse Bernard operated his business on his own;
(admitted)
(c)
The Payor's business is
an accounting firm; (admitted)
(d)
Alphonse and Claude
Bernard have their accounting designations, while Hélène Lagacé has a great
deal of accounting experience; (admitted)
(e)
Alphonse and Claude
Bernard are the Payor's only directors, and their sole duty is to approve the
financial statements at the end of the year; (denied as written)
(f)
Each shareholder
manages his or her own client base; however, when it comes to purchasing,
reorganization or hiring, all shareholders are consulted; (denied)
(g)
The busiest time for
the Payor is between February and the end of May, the income tax return filing
period; (denied)
(h)
The Payor's revenues
have been rising steadily for a few years and reached $476,000 in
December 2008; (admitted)
(i)
The Payor employs
between seven and eight persons, shareholders included; (admitted)
(j)
The Payor's business
hours, that is, those adhered to by the shareholders, are from 8 a.m. to
4:30 p.m. from Monday to Friday, whereas the employees' schedule is from
8:30 a.m. to 4:30 p.m. for 35 hours a week; (denied as
written)
(k)
The appellant was hired
by the Payor for the first time during the period at issue; (admitted)
(l)
The appellant has been
retired since October 31, 2008, after 30 years of employment at the
Centre de Santé et services sociaux de Baie-des-Chaleurs; (denied as
written)
(m)
When she was hired, the
appellant had a specific mandate to carry out, that is, to reorganize and
standardize the professional staff filing system, update the boilerplate
letters and act as a resource person for the secretary/receptionist, who was
relatively inexperienced; (admitted)
(n)
The appellant's work
schedule was determined by Alphonse Bernard's because they travelled together;
she therefore worked 40 hours a week even though she was paid for
35 hours; (admitted)
(o)
The hours worked by the
appellant were not compiled because she was paid a fixed weekly salary and her
duties were related to the administration of the business and not directly to
operations; (denied as written)
(p)
The appellant's salary
was determined at a consultation with shareholders, after a discussion with the
appellant on the salary she earned at her former employer and her expectations;
(admitted)
(q)
In determining the
appellant's salary, the shareholders took into consideration the fact that the
work mandate was very specific and limited in time and that once it was
completed, the appellant's employment would be terminated and she would not be replaced;
they also considered the appellant's experience in the field; (admitted)
(r)
The appellant received
an annual salary of $60,000, which is higher than the three shareholders' base
salary without taking into account the bonuses they are paid; (denied as
written)
(s)
The appellant earned
$2,307.69 in gross wages every two weeks; (admitted)
(t)
According to Emploi‑Québec,
the hourly wage in Quebec in 2006–2008 for an executive secretary ranged from
$16 to $25.99; (denied)
(u)
For 17 weeks of work,
the appellant received $20,399, which corresponds to the annual salary
($20,255) received by an arm's length secretary for a full year of work; (admitted)
(v)
The appellant was hired
primarily to reorganize the filing system during the Payor's busiest period; (denied
as written)
(w)
According to the Payor,
the appellant's employment was terminated once her mandate was fully completed,
whereas the appellant asserts that the termination of her employment corresponds
to the fact that the "rush" was over and that she wanted to return to
her retirement, despite the fact that the work was not finished because there
were still improvements to be made, such as to the archiving policy; (denied
as written).
[3]
The Appellant testified. Alphonse Bernard (the
appellant's spouse and majority shareholder of the Payor) testified in support
of the appellant's position. Only Appeals Officer Nathalie Belleau testified in
support of the respondent's position.
[4]
On numerous occasions, the Federal Court of
Appeal has defined the role conferred on Tax Court of Canada judges by the Act.
This role does not allow a judge to substitute his or her discretionary
decision for that of the Minister, but it includes the 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' was still objectively reasonable."
(see Légaré v. Canada (Minister of National Revenue – M.N.R.),
[1999] F.C.J. No. 878 (Q.L.), at paragraph 4).
[5]
Mr. Bernard, whose credibility has not been
put in doubt, testified, in particular, as follows:
i.
The appellant was hired to carry out a specific
mandate consisting essentially of the following tasks:
(a)
reorganize and standardize the Payor's filing
system;
(b)
weed out the inactive files, since the Payor no
longer had space to store its active files;
(c)
reword all of the boilerplate letters to comply
with the standards of the Ordre des comptables agréés [Quebec order of
chartered accountants]; and
(d)
act as resource person for the relatively
inexperienced secretary/receptionist the Payor had just hired.
Mr. Bernard also explained that, although he did not have a
very clear idea of the time required to carry out the mandate, the Payor had
communicated to the appellant that the mandate was temporary in nature and
would take much less than a year to complete.
ii.
Before the Payor hired the appellant to carry
out the mandate, it had been looking for over two years for a person to carry
out the mandate. In that respect, Mr. Bernard explained that the position
had been posted at the Emploi‑Québec office, but that there had been no
takers;
iii.
In early 2007, the Payor absolutely had to find
someone to carry out the mandate because, in particular, the Payor had almost
no space left to store the active files, and its boilerplate letters no longer
complied with the standards of the Ordre des comptables agréés. All in all,
Mr. Bernard went on at length to explain the urgency there had been to
find an experienced person to carry out this mandate;
iv.
The Payor terminated the appellant's employment
on May 1, 2009, because she had successfully carried out the bulk of her
mandate;
v.
The appellant's pay had been negotiated by the
Payor and the appellant, and the Payor had taken the following factors into
account: the specific, one‑off and temporary nature of the mandate, the
urgency to find a person to carry it out, the Payor's repeated and unsuccessful
efforts to find a qualified person to carry out the mandate, and the
appellant's qualifications;
vi.
Only the Payor's employees whose time is billed
to clients had to complete a time sheet; and
vii.
The fact that he paid for the appellant's lunch
and that the appellant travelled with him for free compensated, in a way, for
the unpaid hour the appellant worked for the Payor each day.
[6]
The appellant, whose credibility has not been
put in doubt, referred for the most part to her spouse's testimony. However,
she made the following additions:
i.
For over 30 years, she held a position as
executive secretary at the Centre de santé et des services sociaux de la
Baie-des-Chaleurs;
ii.
The remuneration required and obtained from the
Payor was the remuneration she received from her employer before she retired;
iii.
Her employment was terminated when her mandate
was almost fully completed; and
iv.
She did not recall having told Nathalie Belleau
that she had been hired by the Payor to fill a position as executive secretary.
[7]
Let us now consider the Minister's allegations
in light of the facts in the record. First, I am of the opinion that the
Minister erred in relying too heavily on the fact that, according to the
statistics published by Emploi‑Québec, the wages of an executive
secretary in Quebec range from $16 to $25.99. In my view, the Minister erred in
failing to consider the particularities of the situation. First, he failed to
consider the urgency for the Payor to find a qualified, experienced person to
carry out the mandate and the fact that the Payor had been unable to find such
a person, despite having made numerous attempts. The Minister also erred in
failing to consider the lack of employment security and the specificity of the
tasks related to this employment. It should be borne in mind that the Payor was
looking for an experienced person to carry out a specific, short‑term
mandate. The Payor was not, by any means, looking to hire a full‑time
executive secretary. In any event, I am not even satisfied that all of the
tasks given to the appellant corresponded to those normally performed by an
executive secretary, such as those described in the document from Emploi‑Québec
entered in the record as Exhibit I‑1, at tab 5. Furthermore, was
the statistic submitted by the Minister the same for 2009? Did the hourly rate
submitted by the Minister (in this case, $16 to $25.99) include employee
benefits? All of those questions remain unanswered. I would add that it would
be very interesting to know the statistics published by Emploi‑Québec for
the Gaspésie region. That being said, considering that the appellant worked
40 hours a week, not 35 hours, and that the appellant's real hourly
wage during the relevant period was $28.83 ($2,307 ÷ 80 hours), it seems to me
that the appellant's real hourly wage is not far off the maximum hourly wage
earned by an executive secretary in 2008 in Quebec, according to Emploi‑Québec.
I would add that the fact that the appellant's remuneration was higher than
that of the Payor's secretary and shareholders seems utterly irrelevant to me.
This, in my opinion, is conclusive in terms of subparagraphs 6(r),
(s), (t) and (v). None of those subparagraphs provide a
basis for me to reasonably find that there was a non‑arm's length
relationship.
[8]
The Minister also alleged that the appellant's
employment should be excluded because she was doing an hour's unpaid work each
day for the Payor during the relevant period. As such, performing unpaid work
does not necessarily mean exclusion under paragraph 5(2)(i) of the Act.
Everything is a question of circumstance and degree. The fact that the
appellant helped out for free (in this case, for an hour a day) at the family
business while waiting for her spouse, with whom she commuted, to finish his
work does not seem to me a sufficiently important factor to exclude this
employment. In any event, was that hour truly unpaid? In consideration, the
appellant's travel to her workplace cost her nothing, and she was offered lunch
for free.
[9]
Last, I would add that regarding the Minister's
allegations concerning the duration of the work, the testimonies of the
appellant and her spouse have satisfied me that the work performed by the
appellant was not only useful, but necessary. They have also satisfied me that
the appellant's employment was terminated because the mandate had been almost
fully carried out.
[10]
For these reasons, the appeal is allowed.
Signed at Ottawa, Canada, this 8th day of
November 2010.
"Paul Bédard"
Translation
certified true
on this 17th day
of December 2010
Sarah Burns, Translator
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