Docket: 2006-738(EI)
BETWEEN:
SANG DON MOON,
Appellant,
and
THE MINISTER OF NATIONAL REVENUE,
Respondent,
and
MYONG-RAE MOON
o/a JIMMY'S PLACE RESTAURANT,
Intervenor.
____________________________________________________________________
Appeal heard on August 24, 2006 at Vancouver, British Columbia
Before: The Honourable
Justice G. Sheridan
Appearances:
|
Agent for the Appellant:
|
Jung
Moon
|
|
Counsel for the Respondent:
|
David Everett
|
|
For the
Intervenor:
|
Jung Moon
|
____________________________________________________________________
JUDGMENT
The appeal is allowed and the decision of the Minister
of National Revenue is vacated on the basis that the Appellant was engaged in
insurable employment pursuant to
paragraph 5(1)(a) of the Employment
Insurance Act for the period February 1, 2003 to January 31, 2005 in
accordance with the attached Reasons for Judgment.
Signed at Prince
Albert, Saskatchewan, this 3rd day of November,
2006.
"G. Sheridan"
Citation: 2006TCC582
Date: 20061103
Docket: 2006-738(EI)
BETWEEN:
SANG DON MOON,
Appellant,
and
THE MINISTER OF NATIONAL REVENUE,
Respondent,
and
MYONG-RAE MOON
o/a JIMMY'S PLACE RESTAURANT,
Intervenor.
REASONS FOR JUDGMENT
Sheridan, J.
[1] The Appellant,
Sang Don Moon, is appealing the decision of the Minister of National Revenue
that he was not engaged in insurable employment at a restaurant operated by his
wife, Myong-Rae Moon, under the name "Jimmy's Place" for the period
February 1, 2003 to January 31, 2005. Mrs. Moon was the Intervenor in the
appeal.
[2] There is no
dispute that the Appellant performed his duties as an employee working under a
contract of service. The Minister's decision that his work was not insurable stems
from his non-arm's length status as the husband of his employer; applying paragraph
5(3)(b) of the Employment Insurance Act, the Minister, having
considered the circumstances of the Appellant's employment, was not satisfied
that a person dealing at arm's length would have entered substantially the same
contract.
[3] The Appellant
and Mrs. Moon immigrated to Canada from Korea. Since her arrival, Mrs. Moon has worked in food
service and in 1993, started her own restaurant. They both testified at the
hearing with the assistance of an interpreter. Mrs. Moon was an impressive witness
who struck me as an honest, hard-working person. Mrs. Moon's inability to
explain completely how a particular cheque had come into being did not
overshadow the credibility of the rest of her testimony. As for the Appellant,
he had difficulty with the language and often could not remember details of his
employment. The Respondent called Ms. Nasim Kara, the Canada Revenue Agency
rulings officer in charge of the Appellant's file. Ms. Kara gave her answers in
a careful and thoughtful manner.
[4] The Appellant
has the onus of proving wrong the assumptions upon which the Minister based his
determination. The disputed assumptions have mainly to do with the Appellant's
hours of work and his salary. Ms. Kara testified that the factors underpinning
her decision were that the Appellant was paid a monthly salary when the other
employees were paid hourly wages, that he received an unusually large raise in
pay and that he sometimes delayed cashing his pay cheques. These topics are
considered below under their respective headings.
Hours
of Work
[5] The relevant
assumptions are set out in paragraph 7 of the Reply to the Notice of Appeal:
j) the restaurant's hours of operation were from 7 am to 5
pm;
k) Moon required the Appellant to perform the Duties during
the restaurant's hours of operation;
l) the Appellant also put in time before and after the
restaurant's business hours;
..
q) the non-related workers worked only for those hours
scheduled by Moon;
r) the non-related workers were not required to put in hours
before and after the restaurant's business hours; ...
[6] Jimmy's Place
was a small restaurant whose clientele tended to be people working during
normal weekday business hours. It was less busy on the weekend but the restaurant
was open to the public from 7:00 a.m. to 5:00 p.m. The Jimmy's Place
employees also worked before and after normal business hours doing preparation
and clean up.
[7] The Appellant
worked primarily as the cook with usually one or two other employees helping in
the kitchen or serving. He and Mrs. Moon have only one vehicle. This meant that
he sometimes stayed at the restaurant after his shift until Mrs. Moon was able
to leave. As the manager and bookkeeper, Mrs. Moon's responsibilities also included
cleaning and as is the case with many small business owners, generally doing
anything else that was needed. Although their hours of work and duties were set
by Mrs. Moon, all of the employees (including the Appellant) did what was
necessary to keep the business going. They were less concerned with strict
adherence to their schedules and job descriptions than those employed in a more
formalized work environment might be. Mrs. Moon attributed their willingness to
help to their Korean work ethic.
[8] In these
circumstances, I am satisfied that the Appellant worked roughly the hours
prescribed, depending on what was needed, in just the same fashion as his
fellow employees.
Salary
[9] The relevant
assumptions are set out in paragraph 7 of the Reply to the Notice of Appeal:
n) during the Period, the Appellant's salary was $1,500 per
month up to October 2004 when the monthly salary increased to $2,000 per month.
o) the Appellant received two paycheques in October of 2004;
p) the Appellant delayed cashing his paycheques until there
was cash available in the restaurant's bank account;
...
s) the non-related workers did not have to wait to negotiate
their paycheques.
[10] The Appellant
cooked at Jimmy's Place throughout the 12 year-history of the business, until
its sale in January 2005. The other kitchen assistant/servers tended to be
transient as is typical of such employment. Because the Appellant worked
full-time during roughly the same hours each week, he was paid a monthly
salary. The other employees worked part-time and split shifts and accordingly,
were paid hourly. I am satisfied that it was this distinction, rather than the
Appellant's status as his employer's husband, that accounted for the different
methods of payment.
[11] As for the
Appellant's raise in pay, he worked many years without a raise; there is no
suggestion that his salary was not within the normal range for such a position.
His evidence, consistent with that of Mrs. Moon, was that she watched the
restaurant's finances closely. To succeed, a small business cannot spend more
money than it brings in; when Mrs. Moon was satisfied that she could afford to
increase the Appellant's salary, she did so. While I can understand how the percentage
increase in the Appellant's salary might seem high to someone employed by a
large corporation or unionized organization in which regular incremental pay increases
are the norm, it must be considered in the small business context. The increase
in the Appellant's salary was meant to compensate for the lack of increases in
the preceding periods. Mrs. Moon also struggled to provide small increases
in the hourly rate of pay of the other employees, depending on how well they
performed or as an inducement to stay. In my view, these strategies reflected
the economic realities of running a small enterprise: in this regard, both the
Appellant and the other employees felt the effect of the fiscal restraints of
the business.
[12] Finally, on
occasion, the Appellant did not cash his pay cheque until he was satisfied that
there were sufficient funds in the business account to cover the amount. It is
not clear to me that Mrs. Moon required the Appellant to delay cashing
his cheque. I also accept the evidence of Mrs. Moon that although she did not
demand it of her other employees, they, too, sometimes had to wait a period of
time before cashing their cheques. Again, I am satisfied that in the context of
a small business, all of the employees did what was necessary for the general
good.
[13] On the basis of
the evidence presented, I am satisfied that the Minister did not have all of
the relevant facts before him in respect of this aspect of his decision[1]. The Appellant was employed at Jimmy's Place, his
wife's business, in circumstances that were substantially the same as those an
arm's length employee working in that context might have accepted.
[14] The appeal is
allowed on the basis that the Appellant was engaged in insurable employment for
the period February 1, 2003 to January 31, 2005.
Signed at Prince Albert, Saskatchewan, this 3rd day of November, 2006.
"G. Sheridan"
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