Citation: 2007TCC428
Date: 20070723
Docket: 2006-2464(EI)
2007-255(EI)
BETWEEN:
SHAHLA HATAMI,
Appellant,
and
THE MINISTER OF NATIONAL REVENUE,
Respondent.
REASONS FOR JUDGMENT
Miller J.
[1] These are appeals
pursuant to the Employment Insurance Act, involving the provisions of
subsection 5(2) and 5(3) to determine the correctness of the decision of the
Minister of National Revenue finding Ms. Hatami and her employer would not have
entered a substantially similar contract if they had been dealing at arm’s
length. I find it was reasonable for the Minister to have reached that
conclusion.
Facts
[2] Ms. Hatami’s husband,
Iraj Safiyan, commenced a printing/copying business in early 2002 under the
name 4U Publishing and Printing and Photo Finishing Ltd. (“4U”). In early 2005,
he changed the location of the business and the name of the business to
Vancouver Printplus Inc. (“Printplus”). The periods of employment at issue are
November and December, 2002, January to March, 2005, both periods of employment
which took place at 4U, and April and May, 2005, which employment took place at
Printplus.
[3] Ms. Hatami
testified that she helped her husband in his business as he could not afford to
hire others. It was not, however, until November 2002 that she appears to have
been put on the payroll of 4U. Until then, she may have helped her husband, but
not on a regular paid basis. She indicated she was to be paid $1,500 a month
for the months of November and December 2002, as that is what she had been
getting previously working at a daycare. She could not recall that she actually
received the $1,500 a month for November and December 2002. She acknowledged
that, unlike other workers, she was prepared to wait to be paid. She maintained
that she worked regularly, 9:00 to 5:00 for those two months, and indeed worked
harder than anyone else. In November 2002, there was, however, only her and her
husband working in the business. Her husband trained her. Ms. Hatami was pregnant
at the time and had her first child in August 2003. Due to her pregnancy, she stopped
work on December 20, 2002.
[4] There was some
evidence in the form of cheques for $200 and $500, respectively, in the summer
of 2002 payable to Mrs. Hatami, suggesting that she received some remuneration
at a time when she was not actually employed at the business. She indicated
that these cheques were likely made out to her to allow her to get petty cash
for business purposes.
[5] Ms. Hatami was
unclear as to whether 4U hired anyone to replace her in January 2003, though
she believed her husband tried to hire someone. The business would on occasion
rely on what she called practicums, who were not paid.
[6] Ms. Hatami went
back to work in January 2005 when she was pregnant with her second child. She
worked at the premises of 4U for the period January to March 2005 while her husband was
establishing the new Printplus business at a new location. She had to advise
customers of the new location, though she still did photocopying work at the
old location. She provided timesheets for the period showing she worked 9:00 to
5:00 every working day for the three-month period of January to March 2005. She
said she signed these sheets when she found out that EI Regulations
required them. She completed and signed the forms acknowledging that they were
not completed contemporaneously with her work. She had not initially completed
timesheets as she stated her husband trusted her, but he required other
employees to do timesheets.
[7] Ms. Hatami’s job
was to do photocopying and provide customer service. For the five-month period during
which she worked in 2005, she stated she was to be paid $1,500 a month, though again
she could not recall if she actually received such payment. There were times
when she did not cash cheques as the business could not afford to make the
payments, but she claimed the payments were made up by the end of the year. In
2005, there was another worker in the business who was paid on an hourly basis
at the rate of $9.00 an hour. Ms. Hatami acknowledged that her husband would
perform her duties when she was not working.
Issue- Was Ms. Hatami in
insurable employment for the periods November and December 2002 and January to March 2005 with 4U and April
and May 2005 with Printplus?
[8] The key sections of
the Employment Insurance Act are subsections 5(2) 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.
5(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.
There has been considerable jurisprudence surrounding these
provisions. A good summary of the current state can be found in the case of Birkland
v. M.N.R.,
where Justice Bowie wrote:
4. … This
Court's role, as I understand it now, following these decisions, is to conduct
a trial at which both parties may adduce evidence as to the terms upon which
the Appellant was employed, evidence as to the terms upon which persons at
arm's length doing similar work were employed by the same employer, and
evidence relevant to the conditions of employment prevailing in the industry
for the same kind of work at the same time and place. Of course, there may also
be evidence as to the relationship between the Appellant and the employer. In
the light of all that evidence, and the judge's view of the credibility of the
witnesses, this Court must then assess whether the Minister, if he had had the
benefit of all that evidence, could reasonably have failed to conclude that the
employer and a person acting at arm's length would have entered into a
substantially similar contract of employment. That, as I understand it, is the
degree of judicial deference that Parliament's use of the expression "...
if the Minister of National Revenue is satisfied ..." in paragraph 5(3)(b)
accords to the Minister's opinion.
[9] I have concluded,
having heard Ms. Hatami’s evidence, that the Minister’s decision remains
reasonable. I have reached that conclusion for the following reasons.
[10] Firstly, my overall
impression was that Ms. Hatami’s employment arrangement with her husband’s
business was very much a matter of a supportive wife helping out as much as
possible to get her husband’s business up and going. This meant working
sporadically without pay, for example in the summer of 2002. It also meant
agreeing to not cash cheques when the business could not afford to pay. Indeed,
I was not convinced that Ms. Hatami received, even over time, all of the $1,500
a month payments she may have been entitled to. She provided no records in that
regard. This is in no way similar to a contract of employment between arm’s
length parties.
[11] Secondly, Ms. Hatami
referred to receiving no more than the other workers, yet there was little
evidence of there being, apart from her husband, more than one other worker.
There was some suggestion there were volunteers, but only in 2005 did there
appear to have been an hourly worker employed. Ms. Hatami maintains that
she received no more than the other workers, as her salary of $1,500 was
equivalent to a full-time worker paid at $9.00 per hour. This may be, but an
hourly worker who is actually paid every month based on time recorded is not
the same as a salaried worker, not recording hours (and in that regard, I
discount the significance of the timesheets submitted by Ms. Hatami as anything
other than after-the-fact window-dressing) and agreeing not to take the salary
when the business could not afford it.
[12] With respect to the
nature and importance of the work performed, Ms. Hatami testified that
when she left, her husband tried to hire someone else, but often did the work
himself. She could not remember the names of anyone employed in her place. I
found her evidence of replacement workers not convincing.
[13] Finally, the
duration of her work, being two months in 2002 and five months in 2005, both
times when she was pregnant, raises some concern as to similarities with an
arm’s length employment relationship. To go back to work when pregnant for a
very limited period of time may be the very sort of non‑arm’s length
advantage particular to a husband and wife arrangement, that Deputy Judge Rowe may
have had in mind when he wrote in the decision of Sharky v. M.N.R., as follows:
14 I am
satisfied the appellant and her husband proceeded in good faith and attempted
to structure her employment situation in a manner that would be consistent with
an arm's length relationship. However, there were too many odd aspects to the
relationship that were not satisfactorily explained and certain characteristics
thereof were open to appropriate interpretation by the Minister in exercising
the discretion conferred by statute. Certainly, there was office work actually
performed by the appellant but - overall - the facts in the within appeal - like
many other similar cases - disclose it is often extremely difficult for spouses
to act consistently within a working relationship so that a finding can be made
that they would have entered into a substantially similar contract of
employment had they been non-related parties instead of husband and wife.
[14] Ms. Hatami was
concerned that she was being denied her legal rights if not found to have been
in insurable employment. She no doubt feels that way as she did do some work
for her husband’s business. Yet I cannot find in these circumstances that the
working arrangement was substantially similar to an arm’s length arrangement.
As has been pointed out in other cases, it is not for me to second‑guess
the Minister. It was the Minister’s decision. My role is to assess whether the
Minister should have or would have come to a different conclusion having heard
the evidence I have heard. I am satisfied he would not have reached any
different conclusion. The appeals are dismissed.
Signed at Ottawa, Canada, this 23rd
day of July, 2007.
“Campbell J. Miller”
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