|
Citation: 2003TCC792
|
|
Date: 20031118
|
|
Docket: 2003‑1134(EI)
|
|
BETWEEN:
|
|
FERME LORGE INC.,
|
|
Appellant,
|
|
and
|
|
|
|
THE MINISTER OF NATIONAL REVENUE,
|
|
Respondent.
|
REASONS FOR JUDGMENT
Savoie,
D.J.
[1] This
Appeal was heard at Québec City, Quebec, on August 1, 2003.
[2] This
appeal involves the insurability of the job of Pascal Boivin, the Worker, while
he worked for the Appellant during the period at issue, January 1 to November
29, 2002, as understood in the Employment Insurance Act (the
"Act").
[3] On
February 24, 2003 the Minister of National Revenue (the "Minister")
informed the Appellant of his ruling that during the period at issue, the
Worker held insurable employment because it met the requirements of a contract
of service and that there was an employer‑employee relationship between
her and the Worker.
[4] In
making his ruling, the Minister relied on the following assumptions of fact,
which the Appellant admitted or denied:
[translation]
(a) the Appellant
was incorporated on March 18, 1985; (admitted)
(b) the Appellant
operated a hog (110 breeding sows and 540 feeder hogs) and grain production
farm; (admitted with explanations)
(c) the business
operated year round; (admitted)
(d) during the
period at issue, the Appellant's shareholders with voting shares were
Georges
Boivin 41% of the shares
Lorraine
Duclos 39% of the shares
the
Worker 20% of the shares; (admitted)
(e) Georges
Boivin and Lorraine Duclos are the Worker's father and mother; (admitted)
(f) in April
1999, the Worker was hired as a farm worker by the Appellant; (denied)
(g) the Worker's
duties were to take care of the maternity, buy and mix mash, repair machinery
and maintain buildings; (admitted)
(h) the Worker's
duties were set by the Appellant; (denied)
(i) the Worker
worked year round; (admitted)
(j) the Worker
had a 70 hour schedule per week during the summer and 40 hours during
the winter; (admitted)
(k) the Worker
received remuneration of $340 gross pay per week; (admitted)
(l) during the
period at issue, the Worker was paid every week; (admitted)
(m) according to
the guide to wages and salaries in Quebec published in March 2001, the average
weekly salary for a farm worker was $388; (admitted)
(n) the Worker had
no risk of loss or chance of gain; (denied)
(o) the Worker
performed his tasks on the Appellant's farm; (admitted)
(p) the Worker
used the equipment and materials belonging to the Appellant; (admitted)
(q) the services
rendered by the Worker were an integral part of the Appellant's business;
(admitted)
[5] The
explanations brought in evidence by the Appellant established that in addition
to her operations acknowledged by the Minister, she ran a custom work operation
outside as well as doing snow removal.
[6] Ms.
Duclos, the Appellant's agent, wished to explain that contrary to the
Minister's claim at paragraph (f) above, the Worker had not been hired by
the Appellant, but had allegedly become one of her shareholders.
[7] According
to her, the Worker's tasks had not been set by the Appellant. The Worker
allegedly, rather, assumed the responsibilities of his father, Georges Boivin,
as decided by the three shareholders.
[8] She
furthermore specified that the worked incurred risk of loss because he had
guaranteed the business's loans.
[9] Ms.
Duclos admitted almost all of the Minister's assumptions. With regard to the
explanations she brought forward, they did not change the fact that the Worker
only held 20% of the business's voting shares and, on these grounds, he was
subject to the power of the majority shareholders. This situation also explains
that the Worker's risk of loss, if in fact there is any risk, is limited to the
value of the voting shares that he holds, or 20%.
[10] The question of whether there is a relationship of subordination
between the Worker and the Appellant is central to this issue. In other words,
did the Appellant have the power to control and intervene in the work performed
by Pascal Boivin, the Worker?
[11] To determine whether
there was a contract of service, the facts must be examined according to case
law, in light of the four specific criteria of which control is by far the most
important and decisive. A situation similar to the one under consideration was
analyzed by Tardif J. of this Court in Roxboro Excavation Inc. v. Canada (Minister of National Revenue – M.N.R.),
[1999] T.C.J. No. 32, who stated:
In this regard, I consider it important to
point out that the courts have often said that it is not mandatory or necessary
that the power to control actually be exercised; in other words, the fact that
an employer does not exercise its right to control does not mean that it loses
that power, which is absolutely essential to the existence of a contract of
service.
[12] Continuing his analysis, Tardif, J. wrote:
Assessing whether or not a relationship of
subordination exists is difficult when the individuals who hold authority by
virtue of their status as shareholders and/or directors are the same
individuals who are subject to a power to control or to the exercise of
authority in respect of specific work. Put differently, it is difficult to
draw a clear line when a person is an employee and in part an employer all at
the same time.
[13] Still examining the respective rights and obligations of shareholders
who are at the same time workers and shareholders, Tardif J. added:
I do not think that it is objectively
reasonable to require a total, absolute separation between the responsibilities
that result from shareholder status and those that result from worker
status. The wearing of both hats normally‑and this is perfectly
legitimate‑creates greater tolerance and flexibility in the relations
arising out of the two roles. However, combining the two roles produces
effects that are often contrary to the requirements of a genuine contract of
service.
[14] In the case at bar, nothing in the evidence indicates that Georges
Boivin and Lorraine Duclos, the Appellant's majority shareholders, did anything
at all to yield to anyone their majority of shares or the degree of control
that they had in the business, or their right to vote attached to the shares
they hold.
[15] The evidence established that the Appellant is a company controlled by
a related group. A company and an individual who is a member of a related
group that controls the company, are related persons as defined at
section 251 of the Income Tax Act. This Act specifies that
related persons are deemed to not have an arm's length relationship under
paragraph 251(1)(a). The Employment Insurance Act stipulates
that all work in which the employer and the employee do not have an arm's
length relationship is excluded from insurable employment under
paragraph 5(2)(i) except if it is reasonable to conclude that a
similar job would have existed in similar conditions if the parties had had an
arm's length relationship, under subsection 5(3) of the Employment
Insurance Act.
[16] The Minister thus began his analysis of the Worker's employment under
paragraph 5(2)(i) of the Act.
[17] It was established that during the period at issue, the Worker
received a wage of $340 per week, which seems normal according to the Guide
des salaries des professions au Quebec, published in 2001 for the year
2000, which stipulates that the average wage of a farm worker was $388 per
week.
[18] With regard to the terms and conditions of employment and the nature
of the work performed, it has been shown that the Worker had a schedule to
respect and tasks assigned by Georges Boivin, even if the latter did not always
check the work that was performed. The evidence revealed, moreover, that Pascal
Boivin's work was critical to the Appellant's operation and that she would have
to hire another employee if this Worker ceased to work there.
[19] Moreover, it was established that during the period at issue, the
Worker performed jobs every week.
[20] In light of the above, the Minister concluded that, in consideration
of the wages paid, the terms and conditions of employment, and the nature and
duration of the work performed, it was reasonable to conclude that the contract
of employment would have been similar had there been an arm's length
relationship between the parties.
[21] Having concluded that Pascal Boivin's work was not excluded from
insurable employment under paragraph 5(2)(i) of the Act, the
Minister continued his analysis of the Worker's employment under
paragraph 5(1)(a) of the same Act. In so doing, he examined
the employment from the perspective of the four criteria established by case law, that is, control, ownership of the tools, the
chance of gain and risks of loss, and whether the work performed by the
employee was an integral part of the employer's business.
[22] At the end of his analysis, the Minister concluded that the criterion
of control is based on the fact that the employer has the right to give
direction to the employee and to control how he works as well as, with regard
to the final result, the time and the place. In addition, he established that
the equipment and work materials used by the Worker belonged to the Appellant.
Furthermore, the Minister determined that the Worker, Pascal Boivin, incurred
no risk of loss or chance to gain. In this regard, it is important to stress
that despite the Worker's guarantee for the Appellant's benefit, the risk that
he incurred did not surpass the value of his voting shares in the business,
that is, 20%.
[23] According to the
analysis of facts according to the Act, especially paragraphs 5(1)(a) and 5(2)(i),
and according to the criteria established by case law in
Montreal v. Montreal Locomotive Works Ltd. (1947), 1 D.L.R. 161
and Wiebe Door Services Ltd. v. M.N.R.,
[1986] 3 F.C. 553, it is this Court's opinion that it
has been shown that the Worker held insurable employment as understood in the Act,
during the period at issue, since during this period, the Appellant and the
Worker were bound by a contract of service.
[24] Moreover, the evidence has shown that the Worker's employment was
insurable since, in consideration of all the circumstances, inter alia
the remuneration paid, the terms and conditions of employment, as well as the
duration, nature and importance of the work performed, a fairly similar
contract of employment would have been entered into even if there had not been
an arm's length relationship between the Appellant and the Worker during the
period at issue.
[25] For all these reason, the appeal is dismissed and the Minister's
ruling is upheld.
Signed at Grand‑Barachois, New
Brunswick, this 18th day of November 2003.
Savoie,
D.J.
Translation certified true
on this 3rd day of May 2004.
Sharon Moren, Translator
Email this Content