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Citation: 2004TCC715
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Date: 20041019
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Docket: 2002-2358(EI)
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BETWEEN:
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DOMINIQUE DUPUIS,
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Appellant,
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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]
REASONS FOR JUDGMENT
Tardif J.
[1] This is the appeal of a decision
regarding the insurability of the work performed by the Appellant
for Les entreprises Lionel Dupuis Inc. during two
periods: May 1 to December 23, 1999, and February 1, 2000, to
October 12, 2001.
[2] To support and justify the
determination giving rise to the appeal, the Respondent made the
following assumptions of fact:
[Translation]
(a) The Payer, incorporated on October 2,
1978, runs an iron and metal recovery business and also sells
various used pieces of metal.
(b) During the periods in question, Lionel Dupuis,
the Appellant's father, was the Payer's only shareholder.
(c) The Payer runs its business all year
long, with a peak period from April to November.
(d) Depending on the time period, the Payer hires
up to 10 employees, of which many are Dupuis family members.
(e) The Appellant began working for the
Payer as a receptionist and secretary in 1992.
(f) During the Payer's peak period, the
Appellant spent up to 75% of her work time weighing the metal
that the clients delivered and sold to the Payer.
(g) The Appellant worked at the Payer's
premises and was responsible for a large number of office tasks
(phone, mail, bookkeeping and other paperwork).
(h) Every month, the Appellant had to give
the Payer's accountant all of the filed invoices, cheques
written, statements for credit cards used by employees, and bank
deposit and withdrawal slips.
(i) The Appellant was authorized to
sign cheques on behalf of the Payer; only one signature was
required.
(j) The Appellant did not have a specific
work schedule to follow. During the periods in question, she
could work between 20 and 30 hours a week and often had periods
of no work.
(k) The Appellant's real work hours were not
recorded by the Payer.
(l) The Appellant claimed that
during her periods of no work, her two brothers or father
performed her tasks, while in a statutory declaration of
May 3, 2000, the Appellant stated that she
continued to render services to the Payer after December 23,
1999, without being paid.
(m) Huguette Dupuis, the Appellant's mother, had
to perform the same tasks as the Appellant for the Payer.
(n) The Appellant was paid $10/hour for the
hours she was recorded as having worked on the Payer's
payroll.
(o) The hours recorded on the payroll do not match
the hours that the Appellant actually worked.
(p) On December 23, 1999, the Payer issued a
record of employment to the Appellant, indicating that she had
worked 796.5 hours from May 10 to December 23, 1999.
(q) On October 12, 2001, the Payer issued a record
of employment to the Appellant indicating that she had worked
1,577 hours from February 1, 2000, to October 12, 2001,
for the last 53 workweeks.
(r) The Appellant's work periods that were
indicated on the records of employment issued by the Payer do not
match the periods entered on the Payer's payrolls or the periods
that the Appellant actually worked.
[3] The Appellant admitted to the
facts mentioned in paragraphs a, b, c, e, g, h, n, p and q. She
denied those in paragraphs d, f, i, j, k, l, m, o and r.
[4] First, under paragraph
5(2)(i) of the Employment Insurance Act (the
"Act"), the Appellant's work was excluded from insurable
employment because she was not dealing at arm's length with the
company's manager and owner, her father, Lionel Dupuis, the
sole shareholder for Les entreprises Lionel Dupuis
Inc. Paragraph 5(2)(i) of the Act reads as
follows:
(2) Insurable employment does not include:
...
(i) employment if the employer and employee are not
dealing with each other at arm's length.
[5] Under the provisions set out by
this paragraph in the Act, the Agents for the Respondent
investigated and analyzed the available facts to verify whether
the work done by the Appellant during the two periods in question
was similar to or comparable to the work that would have been
done by a third party dealing with the employer at arm's length,
with regard to conditions, pay, duration, content, etc.
[6] The Respondent did indeed find
that the Appellant could not benefit from the exception set out
by the legislation given that there were specific work conditions
resulting from the non-arm's length relationship that the
Appellant had with the company's sole shareholder. The Respondent
therefore relied on the provisions of the Act in determining that
the Appellant's employment was uninsurable.
[7] In her appeal, the Appellant
contested the validity of the Respondent's conclusion by arguing
that the Respondent did not properly analyze the available facts
and drew completely unreasonable conclusions with regard to the
available facts and information.
[8] She described her work and mainly
emphasized the following tasks: payroll preparation, being at the
office to answer calls from clients and to see that everything
ran smoothly. She had some duties relating to the transporting of
goods done by the company trucks, which travelled in the Maritime
Provinces, Quebec and Ontario. The transporting of goods by the
company was subject to all sorts of particularities regarding
insurance, inspections, permits, etc. She was the one who was
responsible for hiring and laying off employees. She took care of
fuel consumption reports, maintenance programs, billing,
licensing and inventory.
[9] She said that she was trained by
her mother who had done the same work for a long period of time.
She briefly explained and described the work done by each of the
family members-her father, mother and brothers-who worked for the
family business.
[10] The company purchased from individuals
or businesses iron and various metals that it then resold. The
purchase or sale price was essentially established in relation to
weight; hence, the importance of the method used to establish the
exact weight. The price was also determined in relation to
different types of metal, which varied considerably based on the
market. The price paid and received for iron and steel was very
different from the price paid and received for copper, etc.
[11] The company had scales, presses, a
shredder, tractor loaders and many trucks that transported
materials over an area, extending beyond the Quebec borders.
[12] As the Appellant was a single parent,
she had to spend a lot of time taking care of her child whose
health was fragile. She explained that at times, she had to miss
work. She was not as punctual at work as she would have liked
because of this.
[13] The Employer reduced the Appellant's
number of work hours compared to when she started, where she
generally worked 40 hours a week. Her work hours were recorded
and calculated in the same way as the other employees at the
company, that is, they were recorded on a chart on her office
wall.
[14] As to her wage of $10.00/hour, this was
her hourly wage which increased over the years. At the
beginning, it was closer to minimum wage.
[15] With regard to insurability, more
specifically, when the parties to a contract of employment do not
have an arm's length relationship with each other, the witnesses'
credibility is very important. In this case, the Appellant's
testimony appeared credible. She acknowledged certain facts
without trying to diminish their importance, even though they
were not to her benefit.
[16] I specifically refer to the fact that
she acknowledged having done work for the Payer outside of the
periods in question, namely payroll, sending out mail and on
occasion, preparing one or several cheques. In her statutory
declaration of May 3, 2000, she stated the following:
[Translation]
There are not many employees in the winter, so I was able to
spend about ½ an hour a week on payroll. I distributed pay
cheques on Wednesday, Thursday or Friday. As for the mail, that
depended. I came when needed. The accounts payable was only at
the end of the month. For records of employment, I only did one,
and as for questions regarding the records, I did not note the
dates when I was called.
[17] The Respondent pointed out that the
fact that the Appellant did some unpaid work decreased the
company's total payroll to an amount equivalent to what the
Appellant received as employment insurance benefits. This is an
instance where the receiveability of the evidence depends on the
amount of work done outside of the employment period and on the
quality of this work.
[18] That is a relevant argument if it
involved extensive and significant work, almost equivalent to
that done during the time periods when her name was entered into
the payroll book.
[19] I do not believe that the balance of
evidence allows me to draw such a conclusion. Rather, it involved
very occasional tasks that required availability on an
intermittent basis. Another way to support the Respondent's
argument would be to find that on one hand, the Appellant lied
about the amount of work done outside the time periods in
question, and, on the other hand, that the parties agreed to take
advantage of the Employment Insurance Program.
[20] If that was the case, why were the
earnings so modest? Why were the workweeks reduced in terms of
hours? Why was the period of work stoppage so short?
[21] The Appellant explained that her
earnings increased over the years and changed with the
requirements of the job and with experience. She also indicated
that she had worked 40-hour weeks, but that because of her child
who often needed her, she was less available. She generally took
vacation during the winter when business was slow.
[22] The Appellant, a single parent,
obviously needed the maximum income to fulfill her family
obligations. Why would she have abused the system in such a small
way if it were easy to organize everything differently with her
father? Why would they not have provided a higher wage with more
hours? If that had been the situation, the Respondent's
interpretation of the facts would have been more plausible.
[23] It is important to note that the
explanations submitted by the Appellant and all the related facts
are plausible.
[24] At the time of the analysis leading to
the preparation of the C.P.T. 110 report, Louise Savard
noted a number of irregularities.
[25] However, these irregularities must be
considered in the particular context of the operations of the
company for which she worked.
[26] The Appellant held a position in the
family business for a long time. The business was strong and
growing. She performed many important tasks. She received a
reasonable wage for her duties. It was stable and ongoing annual
employment.
[27] Because of her family responsibilities,
she had less time to devote to her work. The wage she earned was
not increased to compensate for the Appellant's loss of
earnings from the reduction in her work hours, which is a valid
point when considering the Appellant's credibility.
[28] The decision to extensively invest in
the company's development was very unwise due to the drop in the
price of certain metals. This even led to the company's
declaration of bankruptcy.
[29] In this particular context, it was
completely normal that the family members, who were very much a
part of the business, stood by each other and did the most to try
to save the company from bankruptcy.
[30] The fact that the Appellant helped out
in this particular situation and in a reasonable way, given her
situation, is insufficient for me to find that there was abuse or
even a serious breach likely to invalidate the contract of
employment that was in effect at the time.
[31] It sometimes happens that employees who
are working at arm's length with the owners or managers of a
company that is experiencing major difficulties will help out by
agreeing to be laid off or by agreeing to a decrease in wages or
changes in their working conditions.
[32] In this case, the business' very
difficult economic situation, which ended in an assignment in
bankruptcy, undoubtedly had an impact on the Appellant's contract
of employment.
[33] The legal basis of the Respondent's
findings lies in clearly relevant but incomplete facts. In view
of these facts, the individuals responsible for analyzing the
Appellant's case concluded too quickly that her employment was
uninsurable.
[34] The decision of the Board of Referees,
by which there never was an interruption of earnings, obviously
constituted a determining factor in the progress of the
Appellant's case. I agree that it could have been a point to be
considered. However, it would have been necessary to conduct a
more in-depth analysis of certain points that remained very
ambiguous, even in the Respondent's analysis.
[35] The decision of the Board of Referees
obviously caused a great deal of harm to the Appellant at the
very beginning of the analysis of her case, and this harm was
pervasive throughout the analysis.
[36] The burden of proof rested on the
Appellant. To discharge this burden, she had to show, based on
the balance of evidence, that the terms of her employment were
not unduly favourable or unfavourable.
[37] She satisfactorily proved that she
completed useful and necessary work, for which she received
reasonable earnings. It can be concluded from the explanations
regarding the working context and climate that the employer did
indeed have the power to control the Appellant's work and that it
never gave up that power.
[38] The fact that the Appellant often
called to say that she would be late because of her child's
health problems is certainly an important point in this regard.
In fact, given the context alleged by the Respondent, her father,
the owner of the company and undoubtedly aware of his
grandchild's state of health, would not have needed to know why
she was late. On the other hand, if the Appellant had not been
accountable, she would not have felt obligated to explain or
justify her tardiness.
[39] As to why she was laid off, again the
evidence does not show that it was a false layoff or influenced
by the non-arm's length relationship. Moreover, comparing the
staff logs showed that certain employees who had an arm's length
relationship with the employer had also been laid off during the
same period as the Appellant.
[40] However, the documentary evidence
revealed an uncertainty. The Appellant produced a record of
employment on which the date of return to work was February 1,
2000. This date is inconsistent with the payroll where the
Appellant's name appeared as of April 10, 2000. In her testimony,
the Appellant confirmed the information from the payroll,
completely discrediting the validity of the date indicated on the
record of employment.
[41] This is a point that was given a
determining importance. With regard to this issue, the Respondent
had reason to point out this discrepancy in the Appellant's
file.
[42] However, the Appellant did not try to
explain this discrepancy. She basically testified that she had
returned to work in April.
[43] The burden of proof on the Appellant
has been discharged.
[44] She did indeed work for a reasonable
wage. Some discrepancies revealed by the Respondent are genuine,
but the scope was considerably exaggerated based on a biased
approach taken at the beginning in the Board of Referees'
decision, which the Respondent gave excessive weight to.
[45] For all these reasons, the Court allows
the appeal and establishes that the work done by the Appellant
from May 1, 1999, to December 23, 1999, and from April 10, 2000,
to October 12, 2001, satisfied the requirements of the Act
regarding insurable employment.
Signed at Ottawa, Canada, this 10th day of November 2004.
Tardif J.
Translation certified true
on this 28th day of January 2005.
Julie Oliveira, Translator
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