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Citation: 2008TCC120
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Date: 20080307
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Dockets: 2007-2416(EI)
2007-2879(EI)
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BETWEEN:
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CLAUDETTE GAGNON,
RODRIGUE BRISSON,
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Appellants,
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and
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THE MINISTER OF NATIONAL REVENUE,
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Respondent.
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[OFFICIAL
ENGLISH TRANSLATION]
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REASONS FOR JUDGMENT
Tardif J.
[1] The two Appellants in these appeals worked
for Karine Brisson, who operated a restaurant under the business name Rétro Dog II.
[2] In
both matters, the Respondent determined that the Appellants' employment was
excluded from insurable employment under subsection 5(2) of the Employment
Insurance Act because the parties were not dealing with each other at arm's
length.
[3] Since
the facts related to the appeals were essentially the same, the parties agreed
to proceed on common evidence.
[4] The periods in issue in the matter of Claudette Gagnon,
2007-2416(EI), are from April 25 to October 15, 2005, and from April 28
to September 22, 2006. In the matter of Rodrigue Brisson,
2007-2879(EI), the periods in issue are from May 2 to October 15, 2005, and from April 18
to October 14, 2006.
[5] In the matter of Claudette
Gagnon, 2007-2416(EI), the Respondent relied on the following assumptions of
fact to make his decision:
[TRANSLATION]
5. ...
(a) The
Payor operated a restaurant under the business name Rétro Dog II. (admitted)
(b) The Payor was the
sole proprietor of the restaurant. (admitted)
(c) The Appellant
Claudette Gagnon ("Ms. Gagnon") is the Payor's mother. (admitted)
(d) Ms. Gagnon was
related to a person who controlled the Payor's business. (admitted)
6. ...
(a) The Payor is the
sole proprietor of the Rétro Dog II restaurant, which she registered on
July 7, 1994. (admitted)
(b) Prior to 1994, the
restaurant was operated by the Payor's father Rodrigue Brisson and by relatives
of his. (admitted)
(c) There was a fire
at the restaurant in 1993 and, on June 30 of that year, the Payor
purchased the land from the former owners (shareholders) for $4,995, with the
former owners' consent to rebuild the restaurant. (admitted)
(d) The former
shareholders used the insurance money ($70,000-$80,000) to rebuild, and the
Payor had to borrow approximately $35,000 to acquire the restaurant. (admitted)
(e) Prior to May 2005,
Rodrigue Brisson operated a catering service through 9022‑4627 Québec
Inc., carrying on business as Les Cuisines Bri-Ga. (admitted)
(f) The assets that
belonged to 9022-4627 Québec Inc. were a parcel of land, a building, equipment
and inventory that the Payor acquired on May 5, 2005. (admitted)
(g) During the period in
issue, the Payor operated the Rétro-Dog II restaurant. The restaurant's
operations had three components: (admitted)
- a fast‑food
restaurant that could accommodate 28 to 34 people inside, 25 people on an enclosed
patio and 10 additional people on a second patio outside that was open.
- the restaurant was
operated from April to October each year and offered breakfasts, fast food, and,
on weekdays, a daily lunch menu.
- when in
operation, the restaurant was open seven days a week from 5:00 a.m. to 11:00 p.m. or midnight.
- the second
component of its operations was to sell products such as pies, homemade bread,
buns, jams and other products to the restaurant's customers.
- the third
component of the activities was the operation of a catering service.
(h) The restaurant's
kitchen was too small and was used only to prepare breakfasts and fast food. (admitted)
(i) In 2004, the
Appellant Mr. Brisson, having failed to obtain permission to enlarge the
restaurant's kitchen, set up a kitchen in the garage adjacent to the residence
in which he and his wife Ms. Gagnon, relatives of the Payor, resided. (admitted)
(j) That kitchen is
equipped with two freezers, one refrigerator, two stoves, some work tables, and
a pizza and muffin oven. (admitted)
(k) That kitchen is
used for baking bread, preparing food for the daily menu, selling restaurant
products and preparing dishes for the catering service. (admitted)
(l) During the
periods in issue, Ms. Gagnon worked for the Payor as a cook. (admitted)
(m) Ms. Gagnon worked
for the restaurant before the fire and continued to work for the Payor (her
daughter) after the rebuilding of the restaurant and the acquisition by the
Payor; (admitted)
(n) Ms. Gagnon's main
duties were to prepare the soup stocks, sauce bases, daily lunch menus,
desserts, pies, muffins, jams, homemade bread, buns, beans with pork, etc. (admitted)
(o) From 2004 onward,
Ms. Gagnon worked mainly from home, in her own kitchen or the kitchen set up in
the garage. (admitted)
(p) Ms. Gagnon began
her day at 4:00 a.m. and generally worked at the restaurant from
11:30 a.m. to 1:00 p.m. (admitted)
(q) In the afternoon,
Ms. Gagnon was freer, and could look after personal matters or get a head start
on the dishes and products to be prepared. (denied)
(r) The Appellant had
no schedule to comply with, and could cook in the evenings to get a head start.
(denied)
(s) During the periods
in issue, Ms. Gagnon sometimes worked up to 50 hours a week, but here hours
were not recorded by the Payor. (denied)
(t) She received fixed
pay of $11.00 per hour for 40 hours a week, regardless of the hours that she
actually worked. (admitted)
(u) In addition to her
remuneration, Ms. Gagnon received $60 to $70 a week in "tips" from
the Payor to compensate her for expenses incurred because of the Payor's use of
the premises belonging to Ms. Gagnon and her spouse. (admitted)
(v) This
"tip" money was also used to remunerate the Appellant for the four
hours a week that she spent cleaning the garage kitchen. (denied)
(w) The Payor, who held
a full-time job elsewhere except during the summer, claimed that she alone
looked after the catering service, but Ms. Gagnon and her spouse said
otherwise. (admitted)
(x) The catering
service generated $15,117 in sales for the period from October 2005 to
March 2006 and the Appellant worked there without receiving pay. (denied)
(y) The Appellant was
remunerated exclusively for her work during the restaurant's periods of
operation, namely from April to September or October each year, but she
continued to render services from October to March for the Payor's catering
service, without being paid for that work. (admitted)
(z) During the periods
in issue, that is to say, while the restaurant was operating, the Appellant was
paid for 40 hours per week even though she averaged 50 hours of work per week. (denied)
(aa) The Minister is
satisfied that such terms and conditions of employment could not prevail if the
parties were dealing with each other at arm's length. (denied)
[6] In the matter of Rodrigue
Brisson, 2007-2879(EI), the Respondent relied on the following assumptions of
fact in making his decision:
[TRANSLATION]
5. ...
(a) The
Payor operated a restaurant under the business name Rétro Dog II. (admitted)
(b) The Payor was the
sole proprietor of the business. (admitted)
(c) The Appellant
Rodrigue Brisson ("Rodrigue Brisson") is the Payor's son. (admitted)
(d) Rodrigue Brisson
is related by blood to a person who controls the Payor's business. (admitted)
6. ...
(a) The Payor registered
a sole proprietorship on July 7, 1994, and the business was assigned
registration number 2240741357 in the CIDREQ system. (admitted)
(b) The business operated a restaurant
under the business name Rétro Dog II. (admitted)
(c) Prior to 1994, the
restaurant was operated by the Appellant Rodrigue Brisson, the Payor's father,
and relatives of his. (admitted)
(d) There was a fire at the restaurant
in 1993. (admitted)
(e) On June 30, 1993, the
Payor purchased the land from the former owners for $4,995, and got the former
owners' consent to rebuild the restaurant. (admitted)
(f) The former owners
used the insurance money ($70,000-$80,000) to rebuild and the Payor had to
borrow approximately $35,0000 to purchase the restaurant. (admitted)
(g) Prior to May 2005,
Rodrigue Brisson operated a catering service through 9022-4622 Québec Inc.,
which carried on business as Les Cuisines Bri-Ga. (admitted)
(h) The assets of 9022-4627
Québec Inc. consisted of a parcel of land, a building, equipment and inventory which
the Payor acquired on May 5, 2005, as well as the catering business. (admitted)
(i) During the period
in issue, the Payor operated the Rétro-Dog II restaurant.
The restaurant's operations had three components: (admitted)
- (1) a fast-food
restaurant that could accommodate 28 to 34 people inside, 25 people on an
enclosed patio and 10 additional people on a second patio outside that was open
- the restaurant
was operated from April to October each year and offered breakfasts, fast food,
and, on weekdays, a daily lunch menu
- When in
operation, the restaurant was open seven days a week from 5:00 a.m. to 11:00 p.m. or midnight.
- (2) sales of
products such as pies, homemade bread, buns, jams and other products to the
restaurant's customers.
- (3) a catering
service, operated throughout the year starting in May 2005.
(j) The restaurant's
kitchen was too small and was used only to prepare breakfasts and fast food.
(admitted)
(k) In 2004, the
Appellant Mr. Brisson, having failed to obtain permission to enlarge the
restaurant's kitchen, set up a kitchen in the garage adjacent to the residence
which he and his spouse, the Payor's mother, co-own. (admitted)
(l) That kitchen is
equipped with two freezers, one refrigerator, two stoves, some work tables, and
a pizza and muffin oven. (admitted)
(m) The kitchen is used
for baking bread, preparing dishes for the daily menu, selling products in the
restaurant and preparing dishes for the catering service. (admitted)
(n) Rodrigue Brisson
transported the prepared dishes to the restaurant. (admitted)
(o) During the periods
in issue, Rodrigue Brisson worked for the Payor as a bookkeeper and as a
supervisor and manager in charge of running the business. (admitted)
(p) There is an office
set up in the basement of Rodrigue Brisson's home. The payor's ledgers, payroll
journals, tax returns, deposit books, supplier invoices and other documents are
kept there. (no knowledge)
(q) Rodrigue Brisson
worked for the restaurant before the fire and continued to work for the Payor
after the restaurant was rebuilt. (no knowledge)
(r) Rodrigue Brisson's
main duties were to prepare the restaurant's organization in early April, do
the cleaning, place the orders, hire employees, prepare schedules, open the
business in the morning and close it at night, do the bookkeeping and enter
data in the computer, do the deposits and payroll, maintain the building and
help out at the restaurant at lunchtime by greeting customers. (no knowledge)
(s) Rodrigue Brisson
worked for the Payor at his home, in the kitchen set up in his garage, in the
restaurant, and on the road when running errands. (admitted)
(t) He had no schedule
to comply with. (denied)
(u) He said that he
worked for the Payor all the time and that his hours were not counted. (denied)
(v) During the periods
in issue, he received fixed pay in the amount of $10.00 per hour for 40 hours
of work per week, regardless of the hours that he actually worked. (denied)
(w) It would be
unreasonable to believe that the Appellant Rodrigue Brisson could carry out all
his duties for the Payor in just 40 hours per week. (denied)
(x) The terms and
conditions of his employment were not reasonable. (denied)
(y) The Payor, who had
a full-time job elsewhere except during the summer, claimed that she alone was
responsible for the catering service, even though the Appellant Rodrigue
Brisson and his spouse said that they looked after the catering service. (denied)
(z) The catering
service generated $15,117 in sales for the period from October 2005 to
March 2006. (admitted)
(aa) Rodrigue Brisson
worked in the catering service from October to March for no remuneration. (denied)
(bb) Rodrigue Brisson was
remunerated solely for the periods when the restaurant was in operation, namely
from April to September or October each year. (admitted)
(cc) Throughout the
year, he continued to do the Payor's bookkeeping and the GST/QST returns
without reported remuneration. (admitted)
(dd) It is unreasonable
to believe that an unrelated employee would work without pay. (denied)
(ee) Rodrigue Brisson
rendered services to the Payor throughout the year and there were weeks during
which he was not remunerated. (denied)
(ff) The duration of Rodrigue
Brisson's employment is unreasonable. (denied)
(gg) The Payor did not
pay Rodrigue Brisson for the use of his home's basement and garage, nor did the
Payor pay him for heat or electricity. (denied)
(hh) The Minister is satisfied
that these terms and conditions of employment could not prevail if the parties
were dealing with each other at arm's length. (denied)
[7] Subparagraphs 5(a) through (d) and
subparagraphs 6(a) through (k) are essentially the same and were admitted to by
the Appellants; as for the other subparagraphs, the Appellant Claudette Gagnon
admitted to subparagraphs 6(l) through (p) as well as 6(t), (u), (w) and (y),
and denied subparagraphs 6(q), (r), (s), (v), (x), (z) and (aa); the Appellant
Rodrigue Brisson, for his part, admitted to subparagraphs 6(l), (o), (s), (z),
(bb) and (cc) and denied subparagraphs 6(m), (n), (p), (q), (r), (v), (w), (x),
(y) and (aa).
[8] Both
Appellants testified. Rodrigue Brisson provided the most specific testimony. Among other things, he
explained and described the chain of events and his various experiences before
working for his daughter by running a restaurant that he had previously run with
his spouse.
[9] Mr.
Brisson mainly attacked specific allegations, claiming, among other things,
that he did not open the restaurant at roughly 4:30 to 5:00 a.m. because
he was the one who closed it at midnight.
[10] Mr. Brisson denied receiving all the correspondence concerning the
restaurant. He sought to demolish this allegation by tendering a document
certifying that the owner, his daughter, had received a document concerning the
operation of the restaurant at her private residence.
[11] He also denied that his residence, and especially the office set up
there, was used to store all documents associated with the operation of the
business, but he did admit that the day-to-day bookkeeping and the previous
year's accounting records were indeed kept there.
[12] In addition, he denied that he went to the place of business early in
the morning because the dishes made at the house were not yet ready at that
time.
[13] However, he admitted that he worked without pay, though he hastened to
add that the work in question was minor and comparable to what that a father
would be prepared to do to help his children with a painting job. He said that,
in this case, the work did not involve painting, but rather work such as preparing
and delivering food and producing various GST and QST returns.
[14] In order to justify his unpaid work, Rodrigue Brisson said that he
thought he had the right to work a few hours without losing the right to
receive employment insurance benefits.
[15] He also said that not reporting the hours that he worked might have
been a mistake.
[16] With respect to the use of the personal kitchen and the garage set up
specifically to prepare meals served at the restaurant, Rodrige Brisson
explained that, first of all, this use generated truly minimal electricity
costs, and that, secondly, his wife received $60 to $80 in compensation over
and above her remuneration each week. According to the Appellants, this amount
was partly to compensate for the use of the premises and cover some of the
electricity expenses incurred, but it also served to pay for the cleaning work
that was done after the premises were used.
[17] The Appellants' personal kitchen, and the garage where the equipment
was located, were used intensively for the preparation of numerous meals during
the period when the restaurant was operating, and afterwards, during the period
when meals had to be prepared and delivered as part of the second component of
the business, namely the catering service.
[18] These were major, intensive and daily activities, because the
restaurant in which the meals were served was too small to prepare meals in
large quantities.
[19] Indeed, only a few very quick dishes were prepared at the restaurant,
and even then, the basic ingredients had most often already been prepared at
the Appellants' personal residence.
[20] The Appellant was also responsible for running errands, transporting
the meals from the private residence to the restaurant, transporting the
restaurant's garbage cans, closing the restaurant, and looking after basic bookkeeping.
The other bookkeeping was done by another person whose services the
business retained.
[21] As for the Appellant Claudette Gagnon, she explained that she started
her work very early in the morning, at roughly 4 a.m, by preparing the homemade
bread, the desserts and the lunch dishes. Her work ended at approximately 1 p.m.
[22] She explained that, in addition to her weekly
pay, she received compensation ranging from $60 to $80 per week for cleaning, for
the use of the kitchen and garage, and to reimburse electricity costs and the
costs of various housekeeping products.
[23] As for the amount of time that it took to do the cleaning, Ms. Gagnon
said that it could vary, but that it generally took a few hours, though it
could sometimes take more than four hours, for example when a mishap, like a spill,
or an overflow of pie filling during baking, took place.
[24] However, she added that when something like this happened, the burden
was not borne by her daughter Karine; in other words, if she had to spend a
large number of hours cleaning her kitchen and garage, her daughter had nothing
to do with this extra work. The least that can be said is that this is not the
way that an ordinary employee would act.
[25] Louise Dessureault, the appeals officer, also testified. She
explained what led to her determination that it was not reasonable to believe
that the Appellants would have entered into a substantially similar employment
contract, having regard to the terms and conditions and duration of the work,
if they had been dealing with each other at arm's length.
[26] In fact, she grouped together the elements taken into account based on
the various factors listed by Parliament, namely the terms and conditions of
employment, the remuneration paid, the nature and importance of the work, and
the duration of the employment.
[27] The appeals officer's analysis of the file shed light on a nebulous
aspect of the financing, namely the fact that, in a sense, the Appellant
Rodrigue Brisson financed the restaurant that his daughter purchased after a
fire that took place at the time that he was running it. This fact was
acknowledged by Mr. Brisson, who said that he preferred to receive the interest
rather than see his daughter pay it to a bank.
[28] Ms. Dessureault also prepared a table showing
the time that the Appellants spent on their catering service:
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Breakdown
of Karine Brisson's Business Revenues – Rétro Dog 11
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Year:
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2005
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2006
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Revenues
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Revenues
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Revenues
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Revenues
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Catering
Service
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Restaurant
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Catering
Service
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Restaurant
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Month
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January
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$4,158.72
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Februaryr
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$2,124.17
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March
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$323.00
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April
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$5,859.91
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$9,791.82
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May
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$307.85
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$19,521.33
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$24,267.00
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June
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$5,501.60
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$23,753.53
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$1,030.58
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$25,528.00
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July
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$409.00
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$28,643.67
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$27,829.00
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August
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$23,801.40
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$666.82
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September
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$16,014.03
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$15,306.56
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October
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$4,352.53
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$8,309.09
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November
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$2,419.87
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$1,488.85
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December
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$1,738.75
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Total
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$14,729.60
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$117,593.87
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$9,125.32
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$134,698.29
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In light of this table, Ms. Dessureault concluded that the Appellants did
a substantial amount of unpaid work as part of their catering service;
moreover, they got nothing for the occupancy of the premises, and they even
bore the costs associated with the use of the premises: telephone, rent,
electricity, etc.
[29] She also noted that the compensation artificially
increased the insurable earnings, though a significant amount of this money, according
to the Appellants' own admission, served to reimburse part of the rent, the electricity
bill and other expenses.
[30] In addition, Ms. Dessureault shed light on certain evidence concerning
the number of hours of work at the beginning and end of the periods, showing
unambiguously that things worked exactly as though the business were being
operated jointly by the Appellants and their daughter.
[31] Did the analysis contain factors other than
those established by the evidence? Did it take irrelevant considerations into
account? Was a great deal of weight accorded to irrelevant considerations? My
answer to all these questions is that the investigation obtained most, if not
all, of the relevant evidence. Moreover, the analysis is entirely appropriate,
and I consider the conclusions to be very reasonable under the circumstances.
[32] Mr. Brisson certainly managed to show that he was not the person who
opened the restaurant at 5 a.m. He certainly made some clarifications with
respect to the fact that almost all the documents related to the management of
the restaurant were in an office inside his personal residence. He also proved
that his daughter, the Payor, had on at least one occasion received
correspondence concerning the restaurant, thereby demolishing the assumption
that all documents concerning the restaurant were addressed to Ms. Gagnon's
personal residence.
[33] Those considerations are completely secondary and marginal in the
analysis of a matter of this kind.
[34] The true question is whether a third party or third parties would have
accepted similar working conditions, a job of similar duration, and similar
remuneration to what existed in the case at bar.
[35] In the instant case, the Appellants made their home's kitchen and
garage available to the restaurant in exchange for ludicrously low amounts of
money.
[36] The Appelants' pay was entirely unrelated to the number of hours that
they worked, and this is completely contrary to employment practices in this
field.
[37] The Appellants routinely worked free of charge. The real reason for
the addition to Ms. Gagnon's remuneration was to cover part of the electricity
and rent.
[38] Those are a few decisive elements based on which it can be concluded,
beyond a shadow of a doubt, that no one at arm's length would have accepted
such an employment relationship.
[39] Although, employment by a person with whom one is not dealing at arm's
length is clearly excluded from insurable employment, the exclusion is not
absolute.
[40] However, in assessing evidence that goes to the
question of whether a person at arm's length might have agreed to substantially
similar terms and conditions of employment, it is certainly important to take
into account what I would call the dynamism, interest, enthusiasm, zeal, and,
to some extent, the volunteer spirit of employees who are not dealing with
their employers at arm's length; this can be an acceptable and even reasonable
situation, depending on the context.
[41] Not everyone who works in such a context should be penalized.
However, terms and conditions of employment that are patently unreasonable
because they cross the line of acceptability must be rejected.
[42] In the case at bar, there is no doubt in my mind that the
preponderance of the evidence, both during the investigation and analysis and
during the hearing, decisively showed that the Appellants' terms and conditions
of employment were significantly shaped by their non-arm's-length relationship
with the Payor, to the point that I wondered whether the Appellants were still
the restaurant's true owners.
[43] For these reasons, the appeals are dismissed.
Signed at Ottawa, Canada, this 7th day of March 2008.
Tardif J.
Translation certified true
on this 21st day of April 2008.
Brian McCordick, Translator
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