Citation: 2004TCC717
Date: 20041110
Dockets: 2003-852(EI)
2003-855(EI)
2003-853(EI)
BETWEEN:
ALAIN BÉRUBÉ,
LOUISE ROBICHAUD,
DONALD CHARETTE,
Appellants,
and
THE MINISTER OF NATIONAL REVENUE,
Respondent.
[OFFICIAL ENGLISH TRANSLATION]
REASONS FOR JUDGMENT
Angers J.
[1] These are appeals
of an assessment by the Minister of National Revenue (the “Minister”), dated
December 11, 2002, stating that the Appellants’ employment with the company
9033-2024 Quebec Inc., operating as Charette Cycle (hereinafter Charette
Cycle), was not insurable within the meaning of the Employment Insurance Act
(EIA). These appeals were heard on common evidence.
[2] In Alain Bérubé’s
case, the period in question is from February 25 to June 8, 2001. The
Minister claimed that the employment did not meet the requirements of a
contract of service and that there was no employer-employee relationship
between the Appellant and Charette Cycle because they made an arrangement that
would allow the Appellant to be eligible for employment insurance benefits.
[3] The periods in
question in the Appellant Louise Robichaud’s case are from March 9 to September
18, 1998, April 4 to September 13, 1999, and from November 1, 1999, to March 4,
2000. For these periods, the Respondent claims that the Appellant’s employment
with Charette Cycle was not insurable because it did not fill the requirements
for a genuine contract of service and there was no employer-employee
relationship between her and Charette Cycle because they made an arrangement that
would make the Appellant eligible for employment insurance benefits. The
Minister determined, in the same decision, that the Appellant’s employment from
March 5 to August 4, 2000, and from April 2 to August 31, 2001, was insurable
employment.
[4] As for the
Appellant Donald Charette’s case, the periods in question are from February 2
to March 13, 1998, May 11, 1998, to February 12, 1999, April 5 to December
10, 1999, and from July 17 to September 29, 2000. The Respondent claims that
his employment is not insurable because he does not meet the requirements for a
contract of service and there is no employer-employee relationship between him
and Charette Cycle. In the alternative, the Respondent claims, after having
examined the terms and conditions of employment, that a similar employment
contract would not have been drawn up if Charette Cycle and the Appellant had
been dealing at arm’s length.
[5] Charette Cycle was
incorporated on March 28, 1996. During the periods in question, Luc Charette
was the sole shareholder. The Appellant Donald Charette is Luc Charette’s
brother. Charette Cycle runs a business in St-Gabriel, Quebec, that sells parts for and
repairs motorcycles. At the business site, he runs a Sears catalogue counter.
According to the owner, the proportion of his sales figure that comes from the
Sears counter is around 20%, whereas the figures provided show a lower
percentage. This business operates throughout the year, but the busiest time is
during the spring and summer. It is open from Monday to Friday, 9:00 a.m.
to 5:00 p.m., except Thursdays and Fridays, when it closes at 9:00 p.m.
[6] Except for the
facts stated above, the Appellant’s representative denied the presumptions of
fact on which the Minister’s decisions were based. Below are statements from
each of the Appellants’ files:
Alain Bérubé:
[translation]
The Respondent, the Minister of National
Revenue, based his decision on the following presumptions of fact:
. . .
(e) the Payor’s financial statements showed the following:
2001
gross income 105806
profit (loss) ($4,281)
(f) repairs and the sale of design parts made up 95% of the Payor’s
sales figures for the year in question;
(g) the company operated all year, but the busiest time of year for the
Payor was the spring and summer;
(h) business hours were from 9:00 a.m. to 5:00 p.m. Monday to Wednesday,
and 9:00 a.m. to 9:00 p.m. Thursday and Friday;
(i)
on an undetermined date, the Payor hired the
Appellant as a mechanic;
(j) during the period in question, the Appellant was on the Payor’s
payroll for 15 consecutive weeks of work at 40 hours per week;
(k) during the period in question, the Appellant’s wages were allegedly
$12.00 per hour, and the Appellant’s alleged paycheques were signed by him and
deposited into the Payor’s bank account;
(l)
the Payor and the Appellant claimed that the
Appellant’s salary was paid in cash, whereas the Payor’s entire billing for
2001 only came to a total of 207.5 hours of billed work;
(m) during the period in question, there were only 87.25 hours of
repairs billed by the Payor, whereas the Appellant appears on the payroll for
600 hours;
(n) before the period in question, the Appellant provided some services
to the Payor without appearing on the payroll;
(o) the Payor’s payroll does not reflect reality regarding the hours the
Appellant actually worked;
(p) there was no mechanic on the Payor’s payroll to work on motors and
transmissions following the Appellant’s alleged dismissal, whereas the Payor’s
income from the sale of parts and repairs was the same for the months following
the periods in question;
(q) the Appellant’s alleged periods of work do not correspond to the
Payor’s busiest periods;
(r) on June 15, 2001, the Payor issued a record of employment to the
Appellant, which indicated the first day of work as February 26, 2001, and
the last day of work June 8, 2001, 600 insurable hours, and total insurable
earnings of $7,488.00;
(s) the Appellant needed 600 hours in order to qualify for employment
insurance benefits;
(t) the Payor and the Appellant had an arrangement so that the Appellant
could qualify for employment insurance benefits.
Louise Robichaud:
[translation]
The Respondent, the Minister of National
Revenue, based his decision on the following presumptions of fact:
. . .
(d) The Sears counter was open all year, whereas the motorcycle-related
activities took place mainly from March to September.
(e) The Payor hired the Appellant as sales clerk for the Sears counter.
(f) The Appellant and Mr. Charette are the only people who work at the
Sears counter.
(g) The Appellant was to work at the Sears counter mainly during the
high season for motorcycles since Mr. Charette would spend much more time on
motorcycle repairs.
(h) The Appellant’s main duties were to take care of the Sears counter,
order parts, prepare invoices, make deposits, take care of maintenance, and
open and close the store.
(i)
The Appellant did not have set work hours; she
came in according to the Payor’s needs, and the Payor did not keep track of her
hours.
(j) When she appeared on the payroll, the Appellant was sometimes shown
as working 40 or 44 hours per week, sometimes for the same number of hours over
two weeks, and sometimes for only seven hours per week.
(k) During and between the periods in question, the Appellant provided
services to the Payor without appearing on the payroll.
(l)
On October 8, 1998, the Payor issued a record of
employment for the Appellant, number A65227751, that indicated she had started
working on March 9, 1998, and finished on September 18, 1998.
(m) In her statutory declaration, signed and dated February
26, 2002, the Appellant admitted that her record of employment was false
in terms of the first day of work, since she started working part time in
August 1997.
(n) On August 20, 1999, the Payor issued a record of employment for the
Appellant, number A66090363, that indicated she had started working on December
21, 1998, and finished on August 13, 1999. On September 1, 1999, the Payor
amended the date the Appellant started work and stated that she started on
April 4, 1999.
(o) In her statutory declaration, signed and dated February
26, 2002, the Appellant admitted that her record of employment was false
in terms of the first day of work, since she had gone back to work for the
Payor on or around September 24, 1998.
(p) On August 22, 2000, the Payor issued a record of employment for the
Appellant, number A70065619, indicating that she had started working on
November 1, 1999, and finished on August 4, 2000.
(q) In her statutory declaration, signed and dated February
26, 2002, the Appellant admitted that her record of employment was false
in terms of the first day of work, since she had gone back to work for the
Payor on or around August 25, 1999.
(r) The Appellant’s alleged periods of employment, between March 9,
1998, and March 4, 2000, do not correspond to the Payor’s periods of high
activity or with the periods the Appellant actually worked.
(s) There was an arrangement between the parties that would allow the
Appellant to qualify for employment insurance benefits.
Donald Charette:
[translation]
The Respondent, the Minister of National Revenue, based his
decision on the following presumptions of fact:
. . .
(f) the Payor’s financial statements indicated the following:
|
|
|
1997
|
1998
|
1999
|
2000
|
|
|
gross income
|
$80,331
|
$109,242
|
$107,492
|
$105,806
|
|
|
profit (loss)
|
($1,849)
|
$4,650
|
($2,867)
|
$5,115
|
(g) motorcycle repairs and the sale of parts made up 95% of the Payor’s
sales figures for the years in question;
(h) the company operated all year, but the Payor’s busiest time of year
was the spring and summer;
(i)
business hours were from 9:00 a.m. to 5:00 p.m.
Monday to Wednesday and 9:00 a.m. to 9:00 p.m. Thursday and Friday;
(j) the Appellant was hired as a mechanic and motorcycle assembler;
(k) during the periods in question, the Appellant was on the Payor’s
payroll for work weeks varying from 7 to 50 hours per week;
(l)
the Appellant’s alleged paycheques were signed
by the Appellant and deposited to the Payor’s bank account, whereas the
Appellant, when paid, was paid in cash;
(m) the Appellant’s work periods did not correspond to the Payor’s
busiest periods;
(n) the Payor’s payroll did not reflect reality in terms of the hours
and weeks the Appellant actually worked;
(o) on March 19, 1998, the Payor issued a record of employment to the
Appellant, indicating the first day of work was February 2, 1998, the last day
of work, March 13, 1998, 300 insurable hours, and total insurable earnings of
$3,000.00;
(p) on February 26, 1999, the Payor issued a record of employment to the
Appellant, indicating the first day of work was May 11, 1998, the last day of
work, February 12, 1999, 592 insurable hours, and insurable earnings for 11
weeks at a weekly salary of $447.20, and 5 weeks at a weekly salary of $50.96;
(q) on December 17, 1999, the Payor issued a record of employment to the
Appellant, indicating the first day of work was April 5, 1999, the last day of
work, December 10, 1999, 516 insurable hours, and total insurable earnings of
$4,711.20;
(r) on October 2, 2000, the Payor issued a record of employment to the
Appellant, indicating the first day of work was July 17, 2000, and the last
day, September 29, 2000, 462 insurable hours, and total insurable earnings of
$4,638.40;
(s) the Appellant worked for the Payor while receiving employment
insurance benefits;
(t) the Payor and the Appellant had an arrangement that allowed the
Appellant to receive employment insurance benefits while working for the Payor.
[7] According to the
owner, Luc Charette, his company mainly repaired, built and assembled various
brands of motorcycles, including Harley Davidson. It was located in a
three-storey building in St-Gabriel, a small village of 2000 people. He had
been running his company since May 1996. He did not have any professional
training in mechanics, but learned as he went. In the beginning, he had an
associate, but he bought this associate’s shares before the periods in
question. His brother, Donald Charette, then became his mechanic but after he
was hurt in an accident, he hired the Appellant Alain Bérubé as a mechanic from
February 26 to June 8, 2001.
[8] He explained to the
Court that during the winter months, the company mostly assembled motorcycles
according to the clients’ requirements and tastes. He considered this work
long-term contracts since they were spread out over more than six weeks,
especially when it involved dismantling parts to have them chrome-plated,
painting the structure, and assembling everything once the parts came back.
This type of contract is done at a set price and he does not need to keep track
of his mechanic’s time. In fact, the mechanic’s time is only calculated when he
works for clients by the hour.
[9] He keeps what he
calls a draft of the hours devoted to a client, but these hours do not appear
on the set-price invoices where the mechanic’s time was already indicated. He
added that he provided his mechanics with the required tools and that he was
the one who gave them their work duties.
[10] The Appellant Alain
Bérubé was hired to work 40 hours per week for a net salary of $300 per week,
which was converted to gross by Charette Cycle’s accountant. According to Luc
Charette, the Appellant did everything that was related to mechanics, and also
did welding, painting and made parts. The Appellant was paid by cheque every
week. The Appellant signed his cheques, which were cashed at the local Caisse
Populaire by Luc Charette or Louise Robichaud. Luc Charrette claimed that
he never deposited his employees’ paycheques into Charette Cycle’s account. In
the spring, he re-hired the Appellant Louise Robichaud to work at the reception
and at the Sears counter, and he went back to what he called minor mechanics
and the summer routine. He claimed he did not need a mechanic during the active
season and that he took care of the mechanical work himself, when required.
[11] The Appellant Alain
Bérubé was already working at a garage as a mechanic when Luc Charette contacted
him. Since he could not work enough weeks for his employer to be eligible for
employment insurance benefits every year, he agreed to work for Charette Cycle.
He was offered 40 hours per week at $12 an hour, $1 more than with his former
employer. He admitted that he was paid by the week. His hours varied between 35
and 43 hours. He was dismissed on June 8, 2001, because, in his opinion, most
of the work was done and Luc Charette took care of the little jobs. He claims
that he signed his paycheques and Luc would go cash them at the Caisse
Populaire then give him the amount in cash. He received his pay late only once.
His net pay was $370.67 and the cheques submitted as evidence were all first
signed by the Appellant Alain Bérubé and then by Luc Charette or by the
Appellant Louise Robichaud after May 18, 2001.
[12] The Appellant Louise
Robichaud had been working for Charette Cycle
since 1996. She was hired as a receptionist for Charette Cycle and the
Sears counter. She also opened and closed the business when she worked there.
She was hired at $300 net per week for 40-hour weeks, during the company’s
business hours. She was unemployed during what Luc Charette considered the
off-season. According to Luc Charette, Ms. Robichaud sometimes worked every
second week when he had to be away, sometimes only 7 hours a week and she also
went to the place of business every day during his sick leave in 2000. Ms.
Robichaud lives a seven-minute walk away from the place of business.
[13] In her testimony,
Ms. Robichaud explained that she started working at Charette Cycle in March
1998. She worked there until September 18, 1998. She worked there again from
April 4, 1999, until September 13, 2000. These are the periods in question. She
pointed out that from March 5 to August 4, 2000, and from April 2 to August 31,
2001, her job was insurable. She explained that her work was always the same.
She worked at the Charette Cycle and the Sears counters, and she followed her
employer’s instructions. Her net salary varied between $250 and $300 per week.
[14] From August to
November 2000, Ms. Robichaud received unemployment benefits during her sick
leave. On the advice of her doctor, she went for walks. Since St-Gabriel is a
small village, she stopped in at Charette Cycle and occasionally, at Luc
Charette’s request, she would make the company’s bank deposit. She said she did
this a few times. She does not remember working every other week, but claimed
that she worked 7 hours a week occasionally.
[15] Ms. Robichaud
provided two declarations to the Respondent’s representatives, one on October
4, 2001, and another on February 26, 2002. The main difference between the two,
according to her testimony, is the dates on her records of employment. In the
second declaration, she admits stating that the first day of work was false,
but she did so when pressured by two representatives, Mr. Trudel and Mr.
D’Amours. She did not fill it in and does not agree with its content regarding
the dates. According to her testimony, the dates on the records of employment
are true and despite the fact that she declared the date on the last record to
be false, the Minister considered her employment insurable. She admits that she
made a few bank deposits during her period of unemployment, to be
accommodating.
[16] The Appellant Donald
Charette was hired in 1998. He was a motorcycle mechanic in Québec City before he was hired. He
worked 40 hours a week, during business hours, and received a weekly net pay of
$300. From February to March 1998, he received $10 an hour, from May 10 to
September 26 of the same year, he received $7.28 an hour. Luc Charette
explained that he asked his brother to work a seven-hour day to help out, and
his brother declared it on his unemployment cards. He called it "paying
for the teacher." The hourly rate varied because he paid the Appellant
based on a net salary and let the accountant calculate the gross salary. Luc
Charette denied having deposited his brother's paycheques in the Charrette
Cycle account or his own. He admits he signed the cheques, but claimed that he
gave his brother cash. The Appellant Donald Charette did not testify.
[17] The Respondent had
Denis Trudel testify. He has been an investigator since 1992. Following an
anonymous tip about the jobs of the Appellants Donald Charette and Louise
Robichaud, he met with the Appellant Louise Robichaud and went to Charette
Cycle afterwards. Luc Charette cooperated fully and gave Mr. Trudel the
relevant documentation. From this documentation, he established a table of
Charette Cycle's typical operations from 1996 to 2001. For each year, the table
shows the periods worked by the employees and the periods they were receiving
employment insurance benefits, the hours billed for the mechanics' work, the
amount of sales from parts and service, the sale of clothes, the sales from the
Sears counter, the dates of bank deposits made by the Appellant Louise
Robichaud and the number of parts bought by Charette Cycle. Each year is
calculated by week and by month, depending on the case. The billed hours do not
identify the mechanic and the number of hours always appears to be minimal.
Mechanics’ hours were billed while the Appellants Donald Charette or Alain
Bérubé were unemployed, but it is true that Luc Charette was always there and
he also did mechanic work.
[18] As for the bank
deposits made by Louise Robichaud, the table shows that she made some deposits
during her period of unemployment and during periods of work, but not
necessarily every day. Mr. Trudel added that in 1998, the purchase of parts in
May, for $12,285, was high during a time when the Appellant Donald Charette
only worked 7 hours a week and was on unemployment. In January 1999, while the
Appellant Donald Charette was working full time, parts were purchased for $946,
whereas in May, a month in which he only worked a few hours, parts were
purchased for $7,822. In 2001, Mr. Trudel noticed that when the Appellant Alain
Bérubé worked full time, there were almost no hours billed for the mechanic,
but during the period he was unemployed, there were many more. Also, the
company registered high sales figures for June, July, and August, when the
Appellant Alain Bérubé was unemployed. There is no declaration in Donald
Charette's file.
[19] As for the Appellant
Louise Robichaud, Mr. Trudel stated that the first day of work stated on the
record of employment was false, since she allegedly made deposits in the weeks
preceding this date. Based on this information, he maintained his position that
the records of employment do not reflect reality.
[20] Therefore, the
Appellants had to show, on a balance of probabilities, that the Minister's
position in this case is erroneous and that the assumptions of fact on which
the decision was based were false. The evidence produced by the Appellants
shows us a company that did not have what we would call sound management. The
testimony given by its owner, Luc Charette, supports this opinion. I need only
point out his way of setting prices for repairs and personalizing motorcycles
or charging one price to have parts chrome-plated and having all these prices
include his work or that of his mechanic. This explains why there is so little
time that accounts for his mechanics' work on the invoices. The evidence also
showed that a major part of this work of repairing and personalizing
motorcycles can be done late in the fall or during the winter months and not
during the motorcycle season when the clients want to use their bikes. The
billing was often done when the repairs were finished, and this could take many
weeks. Luc Charette does not have a structured billing method that allows for
his company's business to be assessed on a monthly basis.
[21] Luc Charette's
testimony was far from accurate. He claimed to have hired the Appellant Alain
Bérubé at a net weekly salary of $300 whereas the cheques filed as evidence and
the testimony of the Appellant himself show that he received $370 net. Luc
Charette claimed to have hired the Appellant Louise Robichaud in 1996 whereas
she testified that it was in 1998 that she was hired. Mr. Trudel's tables
support Ms. Robichaud. Despite this lack of accuracy, I cannot reject
Mr. Charette's testimony in its entirety. Although he seems disorganized
in his work, the explanations he gave on his company’s productivity seem
credible.
[22] In the case of the
Appellant Alain Bérubé, the Minister's decision was based on the fact that the
Appellant apparently only worked the required number of hours necessary to be
eligible for employment insurance benefits, even though Charette Cycle's sales
figures were increasing. Luc Charette explained this state of affairs in his
testimony by stating that most of the mechanic's work is done during the winter
months and that, during the summer, he can do this work himself. The sales of
parts and services were combined in the table Mr. Trudel prepared so that it
was impossible to identify the income from services rendered compared to the
sale of parts. The billed hours did not identify the name of the employee who
worked, so there is no basis for the presumption of fact in sub-paragraphs (l)
and (m) of the Reply to the Notice of Appeal.
[23] As for the
presumption of fact in sub-paragraph (n) of the Reply to the Notice of Appeal,
the evidence showed that Mr. Bérubé left his job with JLP to go to Charette
Cycle. He therefore did not render any services before the period in question.
The fact that the owner took care of the mechanic's work after
Mr. Bérubé's departure suggests that the company had as much income from
the sale of parts as from repairs. Finally, the Appellant's paycheques were not
deposited to Charette Cycle's bank account as the Minister claims.
[24] The Appellant Alain
Bérubé has therefore his the burden of proof in this case, and his appeal is
allowed in that he held insurable employment during the period in question.
[25] In the case of the
Appellant Louise Robichaud, the question to ask is whether she rendered
services to Charette Cycle while receiving employment insurance benefits. The
Respondent’s evidence relies on the fact that the Appellant's work schedule,
while she was on the payroll, was not consistent in that she sometimes worked
40 to 44 hours per week, sometimes every second week, and sometimes only 7
hours per week. Moreover, the records of employment were false regarding the
first day of work, and finally, the Appellant's periods of employment do not
correspond to the high-activity periods at Charette Cycle.
[26] In this case, Luc
Charette provided explanations about the Appellant's work schedule, saying she
was first hired on a weekly basis that corresponded to the company's business
hours. He also explained why she could work every second week, or even 7 hours
a week. This is because he had to be away and during his absence, he needed the
Appellant to be at the place of business. When the Appellant was away, Luc
Charette took care of all the company's activities except the bank deposits,
which would have required him to go to the bank.
[27] As for the
controversy surrounding the first day of work, the investigator Trudel based
his findings on the fact that the Appellant allegedly made a bank deposit for
Charette Cycle's account a day or a few days before her job started. In his
testimony, Mr. Trudel confirmed that he had no other evidence to establish that
the Appellant did in fact start working before the date indicated. In this
case, I do not feel that a mere bank deposit is enough to establish that the
Appellant started and produced a day of work within the usual meaning. As for
the Appellant's periods of employment, in relation to the busy periods at
Charette Cycle, for the periods in question it is hard for me to establish a
link because, in 1998, she worked for her employer from March 8 to September
18, 1998, and from April 4 to August 15, 1999, and from October 1999 to
February 27, 2000, part time or every second week, during the busy periods.
[28] Mr. Trudel's table
clearly shows that the Appellant made deposits to Charette Cycle's account when
she was receiving employment insurance benefits, and she admits this. Some of
these deposits were made during the periods she worked for the employer. These
deposits were not made on a regular basis and I accept the Appellant's
explanations when she says she was helping out voluntarily during her walks in
the village and visits to Charette Cycle. Nothing in the evidence presented
seems to show that Ms. Robichaud provided more services than the ones that were
described. For these reasons, the appeal is allowed and, during the periods in
question, the Appellant Louise Robichaud's job was insurable employment.
[29] In the case of the
Appellant Donald Charette, the Minister claimed that he allegedly worked for
Charette Cycle while receiving employment insurance benefits, and that he had
an agreement with Charette Cycle so that he would be eligible for benefits
during the periods in question. In the alternative, it was proposed that his
job was not insurable because they were not dealing at arm's length, and his
work conditions would not have been the same if they had been dealing at arm's
length.
[30] As for the first
claim, the Minister stated that the busiest period for Charette Cycle is in the
spring and summer, and although this claim was supported by the sales figures,
the evidence presented by the Appellants shows that this was not the case for a
mechanic's work. In fact, the evidence showed that a mechanic's presence is
required in the fall, during the winter and the beginning of spring when
long-term repairs and renovations are done on motorcycles so that the clients
can use their motorcycles during the spring‑summer period. It is
therefore hard to make a connection between the company's needs in terms of a
mechanic's services and the company's sales figures. Moreover, according to Luc
Charette, he did the minor mechanic's work himself during the busy periods.
This also explains why the Appellant's hours were reduced during the summer
months when his services were not as in demand and when he just seemed to be
giving Luc Charette a hand.
[31] As in the case of
the Appellant Alain Bérubé, the Minister's claim that the Appellant's
paycheques were deposited to Charette Cycle's accounts was erroneous. The
evidence presented by the Appellant persuaded me that this was not the case. I
therefore find that the Appellant's job during the periods in question was
insurable employment since he meets the requirements of a genuine contract of
service in that there was no arrangement between Charette Cycle and the
Appellant.
[32] As for the
Minister's alternative submission, I must point out that neither the appeals
officer nor the Appellant Donald Charette testified at this case. In my
opinion, the evidence presented by the parties on the terms of employment, the
length, type and importance of the work done is identical, for all intents and
purposes, whether or not there is an arm's-length relationship, except for the
Appellant's greater experience, which would justify a higher salary.
[33] In my opinion, the
facts retained by the Minister were not correctly assessed. Given these
reasons, his finding does not seem reasonable to me in this case. The appeal of
Donald Charette is therefore allowed.
Signed at Ottawa, Canada,
this 10th day of November 2004.
Angers
J.
Translation
certified true
on this 18th day
of March 2005.
Elizabeth Tan,
Translator
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