Citation: 2005TCC444
Date: 20051005
Docket: 2004-1984(EI)
BETWEEN:
FORESTIER RÉJEAN
PARADIS INC.,
Appellant,
and
THE MINISTER OF NATIONAL REVENUE,
Respondent,
and
CHRISTINE SERVAIS,
Intervener.
[OFFICIAL ENGLISH TRANSLATION]
REASONS FOR JUDGMENT
Tardif J.
[1] On January 28,
2004, the Appellant was informed that the work done by the Intervener Christine
Servais during the period of January 1, 2002, to May 27, 2003,
was a genuine contract of service and constituted insurable employment, despite
the fact that the parties to the employment contract were not dealing with each
other at arm's length.
[2] The Appellant,
Forestier Réjean Paradis Inc., appeals from this decision.
[3] To explain and
justify the determination under appeal, the Respondent made the following
assumptions of fact, which are set out in paragraphs 8 and 9 of the Reply to
the Notice of Appeal:
[TRANSLATION]
8. Based
on the following assumptions of fact, the Minister determined that Christine
Servais was employed by the Appellant in insurable employment under a contract
of service:
(a) The Appellant is in the forestry
business and is involved in the selective cutting of timber. (admitted)
(b) Until April 2003, Réjean Paradis was
the sole shareholder of the Appellant. Since that date, he has owned 75% of the
Appellant's shares. (admitted)
(c) Ms. Servais has owed 25% of the
Appellant's shares since April 2003. (admitted)
(d) Ms. Servais has been working for the
Appellant since 1999. (admitted)
(e) Ms. Servais is the spouse of Mr.
Paradis, the Appellant's majority shareholder. (admitted)
(f) The Appellant's place of business
is 1274 Roy Street in Normadin — the personal residence of Mr. Paradis
and Ms. Servais. (admitted)
(g) The Appellant operates year-round.
However, during the thaw, that is to say, in March and April, it performs
maintenance on its machinery. (admitted)
(h) The Appellant operates 24 hours a day
from Monday to Thursday. The operations of the business cease on Friday at
approximately 1:30 p.m. (denied)
(i) On Friday afternoons, Mr. Paradis
performs maintenance on the machinery. (denied)
(j) Ms. Servais has the following
duties within the business, among others: make government remittances; prepare
the paycheques, pay invoices, do bookkeeping and accounting for each month's
end, and purchase parts for the machinery. (denied as written)
(k) She is required to perform the
services personally, though Mr. Paradis has sometimes hired additional
help. (admitted)
(l) The worker carries out her duties
at the Appellant's place of business. (admitted)
(m) Ms. Servais has never assumed
personal liability within the business. She does not share in the business'
chance of profit and risk of loss. (denied)
(n) Ms. Servais receives fixed weekly
pay of $550. The payment is made by direct deposit into her personal account.
(admitted)
(o) Ms. Servais is entitled to three
weeks of paid vacation per year. (denied)
(p) The worker gets annual training on
salaries. The Appellant pays for the training. The worker also attends an
annual conference on machinery. (admitted)
(q) The worker reports to
Mr. Paradis regarding her work every three weeks. He sometimes calls
during the week to tell her what machine part to purchase. (denied)
(r) The Appellant supplies the worker
with accounting software, a fax and a hard disk for accounting data. It also
provides her with office supplies. (admitted)
(s) The worker supplies a computer, a
printer and her own vehicle. (admitted)
(t) The Appellant issued a T4
Supplementary form to the worker for the year 2002. (admitted)
9. The Minister
also deemed that the worker and the Appellant were dealing with each other at
arm's length with regard to this employment because the Appellant would have
entered into a substantially similar employment contract if the worker and the
Appellant had been dealing with each other at arm's length, having regard to
the following circumstances: (denied)
(a) The worker was always paid for the
work that she did within the business. (admitted)
(b) The worker's remuneration was
determined by Mr. Paradis and by the Appellant's accountant based on the work
to be performed. (admitted)
(c) Ms. Servais works five days per week
and her schedule varies from 30 to 40 hours per week, depending on the needs of
the business. Her hours are not recorded. (denied)
(d) Ms. Servais is subject to the CSST
and has personal medical insurance from the Caisse Populaire. (no knowledge)
(e) She is entitled to three weeks' paid
vacation per year. (denied)
(f) The worker never provided unpaid
services before or after the period in issue and has always been paid for each
pay period. (denied as written)
(g) Ms. Servais performs work that is
important and necessary in order for the Appellant to operate smoothly. (admitted)
[4] Subparagraphs 8(a),
(b), (c), (d), (e), (f), (g), (k), (l), (n), (p), (r), (s), (t) and
subparagraphs 9(a) and (g) were admitted to. The other assumptions, namely
those set out in subparagraphs 8(h), (i), (j), (m), (o) and (q), the beginning
of paragraph 9, and subparagraphs 9(b), (c), (d), (e) and (f), were denied or
the Appellant had no knowledge of them.
[5] The only people to
testify in support of the appeal were the worker's spouse (the majority
shareholder of Appellant Forestier Réjean Paradis Inc.) and the Intervener.
The person responsible for analysing the file did not testify.
[6] At one point, the
worker, who was employed at a reception centre, had her duties completely
changed due to budget cuts. Things were so bad that her job caused a major
disruption for the family, and, being the parent of two children, the harmony
of the family is a fundamental concern for the worker and her spouse.
[7] The business
operated by her spouse had expanded somewhat, and was able to afford the
services of an employee who would look after all administrative and accounting
matters while being readily available to run errands, only some of which had an
urgency to them.
[8] The worker
estimated that she needed to devote 15 to 20 hours per week to her
administrative work, except for a few weeks before the year-end closing.
Errands were irregular because most of that kind of work was prompted by a
breakdown of equipment and machinery that the corporation, run by her spouse,
operated in the forest.
[9] The worker enjoyed
a great deal of autonomy and freedom in the performance of the work for which
she was responsible. The work was important, but the predominant concerns were
the support and guidance of their two children.
[10] When she was hired,
the worker held no shares in the corporation. At one point, Ms. Servais
became a shareholder and acquired 25% of the voting shares.
[11] The working
relationship between the worker and her spouse, who managed and controlled the
corporation, had strictly nothing to do with market conditions.
The employment contract was fashioned around and influenced by family
concerns. In other words, the Intervener had true influence that enabled
her to plan her work on her own and decide independently whether the children's
needs or the work for the Appellant was more important.
[12] Ms. Servais'
terms and conditions of employment were strictly unrelated to those of the
other employees and were not comparable. First of all, she was the only person
who could do the work for which she was responsible; and secondly, she was the
only person who could decide when and how she would do the work.
[13] The preponderance of
evidence has established that the entire aspect related to family concerns,
which had numerous direct and significant effects on the time and manner in
which the work was performed, was excluded from the analysis.
[14] Only the work, the
duration and the remuneration were taken into account; the context, the content
and certain elements that essentially resulted from the non‑arm's‑length
dealings were not given the requisite attention and consideration. Indeed, the
terms and conditions governing the performance of the work were largely
fashioned by family concerns.
[15] The preponderance of
evidence is that the corporation controlled and managed by the worker's spouse
could afford to offer itself the worker's services. Family life and the
upbringing of the children, who were heavily involved in sports, were
completely fundamental concerns on which neither the worker nor his spouse were
prepared to compromise, even though they had the opportunity. They decided on a
custom-tailored job in which all their family and work-related concerns were
met.
[16] This is not to say
that the employment was a sham; the work was useful and necessary. It could
have been performed by a third party, possibly at lesser cost, but certainly
not in such an accommodating manner. The work was done responsibly, and was
probably done efficiently.
[17] It seemed clear to
me that, following the drastic change in Ms. Servais' working conditions
at the reception centre, she and her spouse joined efforts to create a custom‑made
job in which family concerns were the priority.
[18] Since the
consideration and analysis failed to take a number of very important factors
into account, and, especially, since the finding is in no way a reflection of
the entire set of facts that needed to be taken into account, the determination
is, having regard to the circumstances, neither reasonable nor consistent. The
determination must therefore be reviewed, having regard to all the relevant
facts described above.
[19] In fact, the bonus
of a few thousand dollars in connection with a vacation in Europe confirms the
very special nature of the employment relationship. Another factor, which
arose later, validates this conclusion: at one point subsequent to the period
in issue, the corporation that was responsible for the Appellant's remuneration
reduced its burden and paid only one-half her salary, while another corporation
paid the other half.
[20] Another fact which
was revealed by the evidence, and which is no less important, is that the
Intervener had the authority to sign cheques on her own. Such authority
is, in fact, consistent with what the evidence reveals: the worker's powers and
authority were significantly broader than what a person at arm's length would
generally have.
[21] For all these
reasons, the appeal is allowed on the basis that, in conformity with paragraph
5(2)(i) of the Employment Insurance Act, the work done by the
Intervener for the benefit of Forestier Réjean Paradis Inc. is not insurable
employment.
Signed at Ottawa, Canada, this 5th day of October 2005.
"Alain Tardif"
Translation certified true
on this 23rd day of March, 2006.
Garth McLeod, Translator
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