Citation: 2005TCC193
Date: 20050407
Docket: 2004-2387(EI)
BETWEEN:
LABORATOIRE M P LANGELIER INC.,
Appellant,
and
THE MINISTER OF NATIONAL REVENUE,
Respondent,
and
CHRISTIANE JOYAL PERRAULT and
MICHEL LANGELIER,
Interveners.
REASONS FOR JUDGMENT
[1] These are appeals by Laboratoire
M P Langelier Inc. pursuant to the Employment Insurance Act ("Act")
from decisions of The Minister of National Revenue who, in accordance with
section 5(3) of the Act, was satisfied that two of the appellant’s
employees, Michel Langelier and Christiane Joyal Perreault, were
engaged in insurable employment with the appellant during the period January 1,
2002 to June 18, 2003.
[2] The Appellant
operates an orthotics and prosthetics laboratory with three branches. One
branch manufactures the orthotics and prosthetics, while the other two are open
to the public for sales.
[3] Two corporations held
shares in the Appellant, 2947‑9052 Québec Inc.
("2947"), holding 55 per cent of the shares, and 9024‑1548 Québec Inc.
("9024"), with 45 per cent. Marie‑Paule Langelier,
Michel Langelier’s mother and Christiane Joyal Perrault’s
sister, was the sole shareholder in 2947. Michel Langelier held
80 per cent of shares in 9024 and Christiane Joyal Perrault held
20 per cent. Ms. Langelier held control of the Appellant during the
disputed period.
[4] Ms. Perrault was
employed full‑time at the branch that manufactured the orthotics and
prosthetics and at her home. Her main duties consisted of establishing and
managing budgets, keeping accounting records and preparing financial
statements, handling payroll and supervising the four employees in her
department. She stated that she did not work set hours, but worked
between 35 and 70 hours per week. Weeks of 70 hours were
“exceptional”. She worked from home once or twice per week. She was not paid
overtime, while the Appellant’s other employees were.
[5] Ms. Perrault’s
salary was $614 per week. She was entitled to four weeks of paid vacation per
year. She had taken three weeks. Ms. Perrault was authorized to sign
cheques for the Appellant.
[6] Michel Langelier
had been employed full time by the Appellant since 1986. He was Director
General of the Appellant. His main duties consisted of supervising the six
managers at the three branches, planning the Appellant’s operations, conducting
strategic planning for the business, handling the Appellant’s marketing and
monitoring product quality. He also worked as an orthodist on Saturdays. His
salary, set by his mother, was $702 per week, or
approximately $35,000 per year.
[7] He was entitled to
five weeks of paid vacation per year. The other employees were entitled to four
weeks of vacation. The other employees received bonuses in 2002 and 2003, but
Mr. Langelier only received a bonus in 2003. The managers of the
Appellant's branches earn between $40,000 and $55,000 per year, more than
Mr. Langelier, even though he was their supervisor.
[8] Mr. Langelier
and Ms. Perrault both had life insurance policies, the premiums for which
were paid by the Appellant. The Appellant did not pay premiums for other
employees. Mr. Langelier received his salary when ill, a privilege not
enjoyed by the other employees.
[9] Apparently when his mother transferred shares in the
appellant to him in 2002, Mr. Langelier testified, he hypothecated his home to the
extent of $50,000 as security for a loan to the appellant. The precise date of
the hypothec and the amount is not certain since no copy of the deed was put in
proof; I do not believe this omission is fatal to the appellant.
[10] Mr. Langelier
stated that he did not work set hours, but worked approximately 40 to
50 hours per week.
[11] Madame Langelier was majority owner, directly or
indirectly, of the appellant until January 1, 2004. During 2002 and 2003 she
made gifts of shares to her son and sister.
[12] Madame Langelier declared she did not supervise either her
son or sister, she said she had 100 per cent confidence in them. She considered
them as co‑owners of the business, not employees.
[13] Jacques Rousseau, an Appeals Officer with the Canada
Revenue Agency, reviewed the appellant’s file. The T4 forms of the appellant
indicate that Mr. Langelier was paid bonuses in 2002 and 2003. Salaries
paid to Mr. Langelier and Madame Perrault were based on the appellant’s
ability to pay, he concluded, and not on the basis of their relationship to
Madame Langelier. Three employees, he noted, had salaries superior to Mr. Langelier,
57 had salaries inferior to Mr. Langelier.
[14] As far as Madame Perrault is concerned, I cannot find, on
the facts, that the Minister erred in his determination that she was engaged in
insurable employment with the appellant. She did own shares in 9024 which held
a minority position in the appellant. There was no evidence that her salary was
too high or too low. That she took only three weeks holidays when she was
entitled to four weeks is not necessarily a significant factor. The fact that
she had cheque signing authority is also not significant. Madame Perrault
worked overtime without pay; unpaid overtime by an employee is not unusual,
although it is not frequent. Madame Perrault was the sister of the person
who controlled the appellant and no doubt Madame Langelier had confidence in
her and trusted her. But many employers have employees in whom they have
confidence and who they trust. And it is not exceptional today for an employee
to work at home. There is no significant fact, or a sum of facts, that distinguish
Madame Perrault's relationship with the appellant from that of other
employees.
[15] Mr. Langelier's relationship to the appellant, however,
was different from those of other employees. He was a significant shareholder
in 9024, he did not work regular or fixed hours, he represented the appellant
at meetings of orthodistes. He hypothecated his home to secure a debt of the
appellant. Respondent's counsel argued that he secured the debt in his quality
as shareholder, not an employee. I disagree. He secured the debt because he was
a shareholder but also because he was employed by the appellant and viewed the
appellant as his source of livelihood for many years to come. In fact, he saw
himself as the eventual controlling shareholder of the appellant.
[16] Monsieur Langelier's work was vital to the appellant's
ongoing business. He supervised branch managers, he established the appellant's
budget, he marketed the business. When his mother was away on holidays, he ran
the business. Madame Langelier acknowledged that while she was on top of the
corporate hierarchy and had final say she was often absent and Monsieur
Langelier would replace her.
[17] For these reasons Monsieur Langelier's relationship with
the appellant was different from those of other employees. The Minister of
National Revenue did not consider all circumstances in concluding as he did.
[18] The appellant would not have entered into a substantially
similar contract of employment with a person dealing with it at arm's length.
The appellant relied on Monsieur Langelier's experience and knowledge in doing
the work he did and he was willing to work under the circumstances he did
because he did not deal at arm's length with the appellant.
[19] Therefore the appellant's appeal with respect to the Minister's
determination that Madame Perrault be engaged in insurable employment is
dismissed; its appeal with respect to the Minister's determination that
Monsieur Langelier be included in insurable employment is allowed.
Signed
at Ottawa, Canada, to this 7th day of April 2005.
"Gerald J. Rip"
on this 4th day of April 2005.
Gerald Woodard, Translator
CITATION : 2005CCI193
COURT FILE NO.: 2004-2387 (EI)
STYLE OF CAUSE : LABORATOIRE M P LANGELIER INC., AND M.N.R. AND CHRISTIANE JOYAL
PERRAULT, MICHEL LANGELIER,
PLACE OF HEARING : Montréal, Québec
DATE OF HEARING : December 7, 2004
REASONS FOR JUDGMENT BY : The Honourable Justice Gerald J. Rip
DATE OF JUDGMENT : April 7, 2005
APPEARANCES,
|
Agent
for the Appellant :
|
Alain
Savoie
|
|
Counsel
for the Respondent :
|
Simon
Petit
|
|
|
|
|
Agent
for the Interveners
|
Alain
Savoie
|
COUNSEL OF RECORD :
For the
Appellant :
Name, Alain Savoie
Firm, Melacom –
Division des Personnes Liées.
For the Respondent : John H.
Sims, Q.C.
Deputy
Attorney General of Canada
Ottawa,
Ontario
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