Citation: 2005TCC773
Date: 20051206
Docket: 2005-423(EI)
BETWEEN:
HONG NHAT NGUYEN,
Appellant,
and
THE MINISTER OF NATIONAL REVENUE,
Respondent.
[OFFICIAL ENGLISH
TRANSLATION]
REASONS FOR JUDGMENT
Dussault J.
[1] This is an appeal
from a decision of the Minister of National Revenue
("the Minister") finding that the appellant did not hold
insurable employment during the period from November 2, 2003 to
May 29, 2004, when she worked for Duc‑Chung Nguyen and Thi‑Hanh Nguyen,
who operate the Pho Chieu Tim restaurant ("the Payor").
[2] The basis for the
decision is set out in paragraphs 5 and 6 of the Reply to the Notice of Appeal.
Those paragraphs read as follows:
[TRANSLATION]
5. The Appellant
and the Payor are related persons within the meaning of the Income Tax Act,
since:
(a) Duc‑Chung Nguyen
and Thi‑Hanh Nguyen are co‑owners of the restaurant;
(b) the Appellant is the
daughter of Duc‑Chung Nguyen and Thi‑Hanh Nguyen.
6. The Minister
determined that the Appellant and the Payor were not dealing with each other at
arm's length in the context of this employment. The Minister was satisfied that
it was not reasonable to conclude that the Appellant and the Payor would have
entered into a substantially similar contract of employment if they had been
dealing with each other at arm's length, having regard to the following
circumstances:
(a) the Payor had been
operating a 50‑seat restaurant for about eight years;
(b) during the period in
issue, the restaurant employed four persons: the two partners, the Appellant
and a manager;
(c) the Payor's
restaurant was open seven days a week from 10:00 a.m. to 9:00 p.m.;
(d) during the period in
issue, the Appellant worked in the kitchen and was responsible mainly for
making spring rolls; she also prepared vegetables, meats and salads;
(e) the Appellant has
variously stated that she worked 10 hours a day on Monday, Tuesday,
Thursday and Friday, that she worked from 10:00 a.m. to 4:00 p.m.
Monday to Friday with a 30‑minute meal break and that she worked
40 hours a week with a schedule that varied daily;
(f) the Appellant
claims that she worked 40 hours a week even though she previously said
that she worked only 27.5 hours a week;
(g) the Appellant was
paid a fixed amount of $400 a week;
(h) the Appellant was
pregnant when she began working at the restaurant on November 2, 2003;
(i) on May 29, 2004, the Appellant stopped working because of her
pregnancy;
(j) the Appellant had
previously worked for the Payor from 1998 to June 2000;
(k) she stopped
working in June 2000 because she was pregnant;
(l) the
Appellant claimed that she did not resume working at the restaurant until
November 2, 2003 because she had not found a caregiver, but her first
child was in daycare full time as of January 2003;
(m) after the Appellant
left, the Payor did not hire anyone to replace her.
[3] The following
persons testified: the Appellant, insurability officer Danielle Lacoste
and appeals officer Mireille Lapierre.
[4] The Appellant
explained that she started working at her parents' restaurant in 1997 as a
server and left in 2000 because she was pregnant. She did not resume working at
the restaurant until November 2, 2003 at her parents' request, this time
as a cook. According to her, her mother was overloaded with work and could not
stand it any longer, and it was a daycare problem that prevented her from
starting to work sooner. Working in the kitchen gave her a more flexible
schedule, which helped her follow her child's daycare schedule. However, if the
restaurant was very busy, she sometimes worked as a server and looked after the
cash register. She explained that her schedule varied each week, that it was
established by her mother and that her working hours were recorded on paper. In
her testimony, she initially stated that she worked four days a week from
10:00 a.m. to 4:00
or 4:30 p.m., depending on her spouse's schedule, and that she had a 30‑minute
lunch break. On Monday, Tuesday and Thursday, she had to prepare some dishes in
advance, including the rolls, salads and meats. She stated that she started
working at 8:00 a.m. on those days and also
finished later some days and even closed the restaurant at 9:00 p.m.
occasionally. She later said that she worked five days a week, usually
from 10:00 a.m. to 4:00 p.m., but
that she started at 8:00 a.m. three days a week. She then said that it was difficult to record her
working hours from one week to the next because her schedule varied with the
restaurant's activities. However, she stated several times that she had always
worked 40 hours a week and had always been paid $10 an hour for that
number of hours.
[5] After her
employment ended on May 29, 2004, the Appellant was not replaced until
January 2005. She explained that it was not easy to find a cook for a
Vietnamese restaurant, since cooks were in short supply.
[6] Danielle Lacoste
contacted the Appellant's father, who co‑owns the restaurant. According to
Ms. Lacoste, the Appellant's father initially stated that the Appellant
worked from 10:00 a.m. to 3:00 p.m. Monday to Friday with a 30‑minute
lunch break. When confronted with the fact that this added up to only
22.5 hours a week, he then stated instead that she finished at 4:30 p.m. When Ms. Lacoste
pointed out that this still did not add up to 40 hours a week, he added
that the Appellant also worked on Saturday. When Ms. Lacoste told him that
this still did not add up, he went further and said that she started earlier if
there was more work.
[7] Ms. Lacoste
testified that the Appellant had told her that she usually worked from
10:00 a.m. to 4:00 p.m. and sometimes arrived earlier if there was more work but also finished
earlier sometimes and occasionally worked on Saturday.
[8] Ms. Lacoste acknowledged
that the Appellant had received employment insurance benefits following her
first pregnancy.
[9] Appeals officer
Mireille Lapierre contacted the Appellant's father by telephone. He told
her that the Appellant's working hours were not monitored [translation] "in writing" but
that he had been able to monitor her attendance and that her mother did her
work after the Appellant stopped working.
[10] Ms. Lapierre
also met with the Appellant, who explained that she worked 40 hours a week
with a variable schedule, which meant that it was difficult for her to verify
the actual number of hours she worked per week. The Appellant also told her
that she had to leave work at 4:00 p.m. to pick up her child at daycare.
[11] Ms. Lapierre
filed in evidence a document obtained from the Payor, which shows that another
restaurant employee described as a cook's helper, who worked from May 19, 2001 to August 23,
2003, was paid an hourly rate of $7, $7.20 and finally $7.30 from February 2003
until he stopped working at the restaurant (Exhibit I‑1).
[12] That document does
not cover the Appellant's complete period of work, which began on November 2, 2003; it covers only the pay
periods from the beginning of January 2004 until she stopped working on
May 29, 2004. It indicates that she was a cook and was paid $10 an hour.
However, it also shows that she did not work 80 hours during
11 regular two‑week pay periods. Rather, she worked 64 hours
during two pay periods and 72 hours during another pay period. Yet she was
paid the same amount as during the periods when she worked 80 hours.
[13] Relying on
paragraph 5(2)(i) of the Employment Insurance Act ("the
Act"), the agent for the Respondent submitted that the evidence shows that
the conditions of the Appellant's employment were not the same as those of the
other employees. She noted that the Appellant's remuneration was very high, $10
an hour, whereas Exhibit I‑1 shows that another employee was paid
between $7 and $7.30 an hour, depending on the period involved.
[14] With regard to the
duration of the employment, the agent for the Respondent noted that the Appellant
worked for only seven months beginning in November 2003 on the
pretext that she did not have a caregiver, but the filed receipts show that she
had had a caregiver since at least August 2003. The agent for the Appellant
also pointed out that no one else was hired before the start of the Appellant's
period of employment and that the Appellant was not replaced when she stopped working
in May 2004 either. As a result, it can be asked whether her employment
really corresponded to the employer's needs and whether those needs justified
employment for 40 hours a week.
[15] Moreover, the agent
for the Respondent submitted that the Appellant has not shown that she actually
worked 40 hours a week during her period of employment, which means that
she was in fact paid more than $10 an hour.
[16] In support of her
arguments, the agent for the Respondent referred to the decisions of the Federal
Court of Appeal in Légaré v. Canada (Minister of National
Revenue – M.N.R.), No. A‑392‑98, May 28, 1990, [1999] F.C.J.
No. 878, and Pérusse v. Canada (Minister of National
Revenue – M.N.R.), No. A‑722‑97, March 10, 2000,
[2000] F.C.J. No. 310.
[17] The agent for the Respondent
also relied on the decision of the Federal Court of Appeal in Canada (Attorney
General) v. Jencan Ltd., [1998] 1 F.C. 187, [1997] F.C.J.
No. 876, in arguing that the Minister's decision must be upheld if there
are sufficient facts to support it, even if some of the Minister's assumptions
are rejected.
[18] With regard to the
hourly wage, the agent for the Appellant noted that a distinction must be drawn
between the work done by the Appellant as a cook and the work previously done
by another employee who was only a cook's helper.
[19] On the issue of the Appellant's
work schedule, he noted that the Appellant testified that she in fact worked
40 hours a week with a variable, flexible schedule that was based on the
restaurant's needs, but at least from 10:00 a.m. to 4:00 p.m. He
noted that she testified that she sometimes worked later when her spouse was
able to pick up her child at daycare himself.
[20] With regard to the
employer's needs, the agent for the Appellant stressed that cooks for
Vietnamese restaurants were in short supply and that the Appellant's mother was
able to do more work when she could not find someone to help her.
[21] The agent for the Appellant
also pointed out that the Appellant's employment had already been considered
insurable in the past.
[22] It is important to
note at the outset that just because employment has been considered insurable
in the past does not necessarily mean that it is insurable during another
period. The terms and conditions of the employment during the period in issue
are what matter, and nothing else.
[23] Paragraph 5(2)(i) of the Act provides that insurable
employment does not include "employment if the employer and employee are
not dealing with each other at arm's length".
[24] Moreover, subsection 5(3) of the Act
provides as follows:
(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.
[25] In Légaré v. Canada, supra, Marceau J.A. of the
Federal Court of Appeal described the role of the Tax Court of Canada in an
appeal from the Minister's decision as follows at paragraph 4 of the
reasons for judgment:
4. The Act requires the
Minister to make a determination based on his own conviction drawn from a
review of the file. The wording used introduces a form of subjective element,
and while this has been called a discretionary power of the Minister, this
characterization should not obscure the fact that the exercise of this power
must clearly be completely and exclusively based on an objective appreciation
of known or inferred facts. And the Minister's determination is subject to
review. In fact, the Act confers the power of review on the Tax Court of Canada
on the basis of what is discovered in an inquiry carried out in the presence of
all interested parties. The Court is not mandated to make the same kind of
determination as the Minister and thus cannot purely and simply substitute its
assessment for that of the Minister: that falls under the Minister's so‑called
discretionary power. However, the Court must verify whether the facts inferred
or relied on by the Minister are real and were correctly assessed having regard
to the context in which they occurred, and after doing so, it must decide
whether the conclusion with which the Minister was "satisfied" still
seems reasonable.
[26] Marceau J.A. reproduced the same analysis
in Pérusse v. Canada, supra. At paragraph 15 of the reasons
for judgment, he added the following:
15 The
function of an appellate judge is thus not simply to consider whether the
Minister was right in concluding as he did based on the factual information
which Commission inspectors were able to obtain and the interpretation he or
his officers may have given to it. The judge's function is to investigate all
the facts with the parties and witnesses called to testify under oath for the
first time and to consider whether the Minister's conclusion, in this new
light, still seems "reasonable" (the word used by Parliament). The
Act requires the judge to show some deference towards the Minister's initial
assessment and, as I was saying, directs him not simply to substitute his own
opinion for that of the Minister when there are no new facts and there is
nothing to indicate that the known facts were
misunderstood. . . .
[27] More recently, these words were reiterated by Richard C.J. of the
Federal Court of Appeal in Denis v. Canada (Minister of National Revenue – M.N.R.), 2004 FCA 26, [2004] F.C.J.
No. 400, at paragraph 5 of the reasons for judgment.
[28] The agent for the Respondent argued that the employer's needs did not
justify 40 hours of work a week by the Appellant, since no other employee
did her work before or after her period of employment. She also submitted that
the Appellant's testimony did not establish that she had worked 40 hours a
week; her remuneration was therefore not $10 an hour but more, and thus much
higher than that of another employee who had been paid between $7 and $7.30 an
hour during his period of employment from May 6, 2001 to August 23,
2003 (Exhibit I‑1).
[29] First of all, I will say that the comparison between a wage of $7 to
$7.30 an hour for a person considered to be a cook's helper and the $10 an hour
the Appellant was paid as a cook is not a meaningful comparison, since it is
not based on a characteristic common to both persons. At first glance, the
two jobs are different and involve different tasks, and it has never been
shown why they are so similar that the same wage should be paid for both.
[30] On the question of the duration of the Appellant's
employment and the importance of her work in light of the Payor's needs, I will
note that a cook's helper who was hired before the Appellant worked
continuously for 40 hours a week from May 6, 2001 to August 23, 2003. The Appellant explained
that her mother had asked her to come back to work at the restaurant because
she was overloaded with work and that she had agreed to do so as of
November 2, 2003. The fact that the Appellant's mother was overloaded with
work after the cook's helper left and that she therefore asked the Appellant to
come back to work at the restaurant seems to me a perfectly logical and
consistent explanation in the circumstances, since the Appellant's mother was
alone working in the kitchen.
[31] As for the fact that the Appellant was not replaced after she left on May 29, 2004, the explanation that it was difficult to replace
her because of the shortage of cooks for Vietnamese restaurants strikes me as
entirely plausible.
[32] On the other hand, I must acknowledge that the explanations given by
the Appellant about her work schedule and the assertion that she worked
40 hours a week throughout her period of employment are not as persuasive.
[33] Moreover, Exhibit I‑1 obtained from the employer clearly
shows that the Appellant was always paid the same amount for the 11 regular two‑week
pay periods from January to May 2003 but that she worked less than
80 hours during three of those periods (64 during two periods and 72
during another period). Thus, this document confirms that the Appellant did not
always work 40 hours a week and that she was paid for hours she had not
worked during more than 27 percent of the periods covered by this
document. In my opinion, this is not a condition that a Payor would grant to a
worker with whom it was dealing at arm's length.
[34] This in itself is important enough to conclude that the Minister's
decision still seems reasonable in the circumstances.
[35] Accordingly, the appeal is dismissed and the
Minister's decision is confirmed.
Signed at Ottawa,
Canada, this 6th day of December 2005.
"P. R. Dussault"
Translation
certified true
on this 2nd day of
May 2008.
Brian McCordick,
Translator
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