[OFFICIAL ENGLISH TRANSLATION]
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Reference: 2004TCC63
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Date: 20040305
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Docket: 2003-1788(EI)
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BETWEEN:
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SYLVANA TRUSCELLO MESSINA,
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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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REASONS FOR JUDGMENT
Tardif J. T.C.C.
[1] This is the appeal from a decision
of May 2, 2003. The decision is that the work that the appellant
performed during the period from January 3, 1995, to July 5,
2002, for Bar Café Sorrento Inc. must be excluded from
insurable employment, following the exercise of the discretion
required by the non-arm's length relationship between the
Appellant and the officers of the company paying the earnings.
The Appellant's sons had effective control of the company that
employed her.
[2] The presumptions of fact used to
justify the decision were the following:
(a) Since 1990, the
Payor has been operating a coffee bar that sells coffee and
alcoholic beverages.
(b) The Appellant's
sons, Antonio Messina Jr. and Calogero Messina, were
equal partners in the Payor.
(c) The Payor's
business was operated year-round, from Monday to Sunday, between
the hours of 7:00 a.m. and 3:00 a.m.
(d) The Appellant
was employed by the Payor as a server in the bar; she also
cleaned the establishment.
(e) The Appellant
generally worked from Monday to Friday, from 8:00 a.m. until 4:30
p.m./5:00 p.m., i.e., a 40-hour work.
(f) The
Appellant's work was supervised by one of the shareholders, who
was always on duty.
(g) The Appellant's
employment with the Payor did not entail any expenses for
her.
(h) The Appellant
was entitled to two weeks' paid vacation annually.
(i) During the
period in question, the Appellant received fixed earnings of
$800 a week.
(j) In
addition to her earnings, the Appellant received a bonus of
$10,000 in February 2001 (and a second in February 2002)
with no increase in her duties.
(k) The Payor laid
the Appellant off on July 5, 2002, claiming that sales had
decreased, when in fact the business's growth curve did not
justify this decision.
(l) The
Payor's sales increased from $643,000 in 1997 to
$1,055,980 in 2001.
(m) Moreover, the Payor
gave decreased sales as the reason for terminating the
Appellant's employment, whereas in February 2001 and February
2002, it paid the Appellant and Antonio Messina, the Appellant's
husband, $10,000 in bonuses.
[3] The Appellant admitted paragraphs
(a), (b), (c), (f), (g) and (h) quoted above, which were taken
from paragraph 5 of the Reply to the Notice of Appeal. She also
admitted paragraphs (d), (e), (i) and (k), but reserved the right
to present additional evidence concerning them. Finally, she
denied paragraphs (j), (l) and (m).
[4] The relevant facts are not
contested. Moreover, the hearing dealt primarily with the
question of two bonuses of $10,000 each that the Appellant was
paid in February 2001 and February 2002.
[5] Counsel for the employer explained
that the company had paid these bonuses in recognition of the
Appellant's exceptional cooperation in operating the business.
Counsel also stated that, over the years, the Appellant had
always made herself available to work several hundred hours of
overtime.
[6] Counsel also stated that she was
paid the bonuses in recognition of services rendered during all
the years preceding the fiscal year in which payment was made.
Apart from one fiscal year in which one of the bonuses was paid,
the company had the financial capacity to pay these bonuses.
Moreover, the documentary evidence revealed that the company had
grown and been profitable for most of the period in question.
[7] The Respondent attached
considerable and decisive importance to this question of bonuses.
The official in charge of the file admitted that the appellant
had in fact performed the work over the years, even adding that
this work met all the requirements and conditions to be
considered insurable.
[8] He also stated that the question
of bonuses had been the deciding factor in his recommendation to
exclude the appellant's work from insurable employment.
[9] After stating that this was the
only consideration, he qualified his assessment somewhat by
estimating at 90 per cent the importance of this factor in making
the decision. He claimed that the Appellant's salary was
somewhat high, given that she worked days and not evenings when
the pay was generally higher in this field of economic
activity.
[10] He stressed that the two bonuses
constituted very substantial pay increases for the two years when
they were paid. He did not assess the impact of amortizing the
bonuses over the full length of the period in question.
[11] Alain Lacoste acknowledged that
the work performed by the Appellant, from January 3, 1995, until
July 5, 2002, had been performed continuously, without
interruption. According to him, the work met all the requirements
to be considered insurable. He admitted that, were it not for the
two bonuses, he would have recommended that the work be
considered insurable.
[12] Does giving so much importance to -
indeed basing the determination primarily on - this one factor
constitute a significant error and a serious failing that could
invalidate the findings made?
[13] My answer is yes. It was established
that the Appellant's involvement in the business justified the
payment of these bonuses. It was also established that decision
to pay the bonuses was based on the company's performance when it
was prosperous and profitable. The fact that payment was made
during a difficult financial year may be a troubling aspect, but
it is certainly not the deciding factor.
[14] The Appellant had been working for the
company for a number of years. The bonuses were special
recognition of and appreciation for the quality of the work that
the Appellant had performed for more than seven years.
[15] Over the years, the Appellant had
worked hundreds of hours of unpaid overtime because she was paid
a fixed weekly salary. The representative of the company, her
son, explained that the bonuses were, so to speak, a form of
compensation amply justified by the quantity and quality of the
work performed.
[16] The company continuously employed the
Appellant without interruption during the period in question. The
work she did was important and necessary for the operation of the
company.
[17] This is not a case where the parties
were indulgent and accommodating in order to obtain employment
insurance benefits. The Respondent admitted that the work
performed during the period in question, i.e., for nearly eight
years, would have been insurable had it not been for the
bonuses.
[18] I do not believe that payment of two
bonuses during nearly eight years of work can constitute a
deciding factor that taints the quality of an employment
relationship. The two bonuses, totalling $20,000, average out at
approximately $2,500 a year, or some $50 a week.
[19] During the very long period of
employment, the Appellant was a model, available, reliable and
responsible employee. The fact that her sons recognized her
contribution and that the company they headed rewarded her does
not, in my opinion, have any bearing on the quality of her daily
and weekly work.
[20] Moreover, to accept the Respondent's
analysis would disqualify retroactively employment that, until
the decision was made to pay a bonus, was insurable.
Consequently, given the facts and circumstances and the
particular context, the question of bonuses should be excluded
from the facts that are relevant in determining the insurability
of the work performed.
[21] The question of bonuses was the
deciding factor during the analysis of the case. The undue
importance given to this factor led the Respondent to reach a
completely unreasonable conclusion, having regard to all the
genuinely relevant facts.
[22] Assuming that the question of the
bonuses should not have been the deciding factor in the analysis,
I conclude that the work performed by the Appellant should have
been considered insurable.
[23] Moreover, the investigator and analyst
in the file clearly admitted that, had it not been for the
bonuses, he would have recommended that the work performed by the
Appellant, during the long period in question, be considered
insurable employment since all the conditions and criteria had
been met.
[24] I therefore allow the appeal and decide
that the work that the appellant performed for
Bar Café Sorrento Inc., from January 3, 1995, to
July 5, 2002, was insurable employment.
Signed at Ottawa, Canada, this 5th day of March 2004.
Tardif J.
Certified true translation
Manon Boucher
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