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Citation: 2003TCC823
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Date: 20031124
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Docket: 2003-746(EI)
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BETWEEN:
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DENIS BOUDREAU,
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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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Docket: 2003-747(EI)
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AND BETWEEN:
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MARGUERITE COMEAU,
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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
McArthur J.
[1] These are appeals concerning the
insurability of work performed by the Appellant Denis Boudreau from October 7,
2001 to January 5, 2002 and by the Appellant Marguerite Comeau from January 6,
2002 to April 6, 2002. Together, the appeals cover the period from October 7,
2001 to April 6, 2002.
[2] The two appeals
were heard on common evidence.
[3] The work in dispute was performed on behalf
and for the benefit of the Dalhousie Island Lake Club Inc. ("the Payor").
The evidence showed that the Payor operated a hunting and fishing club in the
Dalhousie region in New
Brunswick.
[4] In refusing to recognize that the Appellant
Denis Boudreau's employment was insurable employment within the meaning of the Employment
Insurance Act ("the Act"), the Minister of National
Revenue ("the Minister") relied on the following assumptions of fact:
[TRANSLATION]
(a)
The Payor is a not-for-profit
company incorporated on or about May 13, 1986.
(b)
The Payor is a hunting
and fishing club with about 300 members, located some 30 miles from Dalhousie.
(c)
The Payor is managed by
a committee of eight individuals.
(d)
The Payor has a main
building with a bar and kitchen and six cabins that are available for rent.
(e)
The site is occupied
mainly in the summer and fall; it is also used in winter by snowmobilers who
come mainly on weekends.
(f)
The Payor hires
janitors year-round for supervision and maintenance of the camp, including the Appellant
and his spouse Marguerite Comeau.
(g)
The Payor provides the
janitors with a room with access to a kitchen, a bathroom and a washing
machine; the Payor does not provide a dryer or food.
(h)
The Appellant and his
spouse live on site for six months each year, and did so during the period in issue.
(i)
During the period in issue,
the Appellant and his spouse were both living full-time in the camp.
(j)
During the period in
dispute, the Appellant and his spouse shared the duties, which consisted in
looking after the rental of the cottages, doing the housework in the main
building, washing dishes and serving in the bar.
(k)
Food, cleaning of the
rental cabins and supervision during the club's social events are handled by
volunteers and by not the janitors.
(l)
Concerning the period
in issue, the Appellant was paid from October 6, 2001 to January 5, 2002 and
received a weekly salary of $486.60 for the first three weeks and $525.00 thereafter.
(m)
The Appellant's spouse
was paid from January 6, 2002 to April 6, 2002, and received a weekly salary of
$525.00.
(n)
Someone else replaced
the Appellant and his spouse beginning April 7, 2001 [sic] for the
following six months.
(o)
The same arrangement existed
for several years between the Appellant, his spouse and the Payor.
(p)
The terms of employment
are an artificial arrangement to enable the Payor to obtain two workers for the
salary of one person while the other person collected employment insurance
benefits.
(q)
The Appellant and the Payor
demonstrated a common interest when the conditions of work were negotiated.
[5] The Respondent initially argued that there
was a non-arm's length relationship between the Appellants and the Payor and
that consequently these were employments that were excluded under paragraph
5(2)(i) of the Act. The Reply to the Notice of Appeal was amended
and the Respondent now argued that the Appellants' jobs were not insurable
employments within the meaning of paragraph 5(1)(a) of the Act.
The Appellants' jobs were not performed under a contract of service, it was
alleged.
[6] The Respondent is of the opinion that the Payor
and the Appellants made arrangements designed to take advantage of the Act.
It was alleged that the terms and conditions of the contracts therefore did not
reflect reality. In theory, the Appellants each worked for three months and
were paid individually for those three months. The three-month periods were
consecutive, so that when the Appellant Denis Boudreau was performing his work,
his wife, the Appellant Marguerite Comeau, was on the premises, and vice versa.
However, Ms. Comeau told the investigator from the Canada Customs and Revenue
Agency, before she learned of the decision concerning their employments, that
even after their respective three-month periods had elapsed, they were each
continuing to do the same tasks. In reality, the Payor was getting 80 hours of
work per week for the price of 40 hours for six months (40 hours worked by Mr.
Boudreau and 40 hours worked by Ms. Comeau). The other 40 hours were paid by
employment insurance. The effect of this arrangement designed to take advantage
of the Act, in the Respondent's submission, was to vitiate the contract
of service, and since it was vitiated these were not insurable employments
within the meaning of the Act.
[7] The Appellants state that these were indeed
contracts of service. The hunting and fishing camp was situated in the middle
of the woods and was worth about $800,000. The Payor had to hire a couple as
janitors since it was essential that someone be present at all times;
otherwise, there were serious risks of fire and theft. Furthermore, the hours
worked by the Appellants over and above their 40 hours per week constituted
volunteer work on their part.
[8] Did the Appellants hold insurable employment
within the meaning of the Act?
[9] Paragraph 5(1)(a) of the Act reads as follows:
Subject to subsection (2),
insurable employment is
(a) employment in
Canada by one or more employers, under any express or implied contract
of service or apprenticeship, written or oral, whether the earnings of the
employed person are received from the employer or some other person and whether
the earnings are calculated by time or by the piece, or partly by time and
partly by the piece, or otherwise
[10] To determine whether a worker was employed
under a contract of service, it is appropriate to refer to the tests laid down
in Wiebe Door Services v. M.N.R.
These tests are: (i) control; (ii) ownership of the tools; (iii) chance of
profit and risk of loss, and (iv) integration. In 671122 Ontario Ltd. v.
Sagaz Industries Canada Inc.,
the Supreme Court of Canada confirmed the currency of these tests while adding
that this was not an exhaustive list and that the courts should not apply these
tests blindly. It is important not to lose sight of reality. Consequently, many
other factors may be considered in determining whether the employment was
performed under a contract of service.
[11] There is a trend in the case law which
holds that a misrepresentation of reality made for the purpose of taking
advantage of the Act means that the employment cannot be considered as
having been performed under a contract of service. Here is what various judges
have said on the matter:
[12] Tardif J., in Thibeault v. Canada, stated:
Genuine employment is employment
remunerated according to market conditions, which contributes in a real and
positive way to the advancement and development of the business paying the
salary in consideration of work performed. These are basically economic factors
that leave little, if any, room for generosity or compassion.
...
Of course, it is neither illegal nor
reprehensible to organize one's affairs so as to profit from the social program
that is the unemployment insurance scheme, subject to the express condition
that nothing be misrepresented, disguised or contrived and that the payment of
benefits occur as a result of events over which the beneficiary has no control.
Where the size of the salary bears no relation to the economic value of the
services rendered, where the beginning and end of work periods coincide with
the end and the beginning of the payment period and where the length of the
work period also coincides with the number of weeks required to requalify, very
serious doubts arise as to the legitimacy of the employment contract. Where the
coincidences are numerous and improbable, there is a risk of giving rise to an
inference that the parties agreed to an artificial arrangement to enable them
to profit from the benefits.
This decision of Tardif J. was upheld by the Federal
Court of Appeal, which dismissed the applications for judicial review, with
costs, on June 15, 2000.
[13] Tardif J. pursued his analysis in Laverdière
v. Canada,
stating:
Of course, a contract of employment may be
lawful and legitimate even if it sets out all kinds of other conditions,
including remuneration much higher or lower than the value of the work
performed; some contracts may even involve work performed gratuitously. Work
may be performed on a volunteer basis. All kinds of assumptions and scenarios
can be imagined.
Any contract of employment that includes
special terms can generally be set up only against the contracting parties and
is not binding on third parties, including the Respondent.
This is the case with any agreement or
arrangement whose purpose and object is to spread out or accumulate the
remuneration owed or that will be owed so as to take advantage of the Act's
provisions. There can be no contract of service where there is any planning or
agreement that disguises or distorts the facts concerning remuneration in order
to derive the greatest possible benefit from the Act.
Finally, in Duplin v. Canada, he added:
The parties may agree on whatever they wish
between themselves, but the Respondent has no obligation to respect or accept
what they choose. The insurability of work depends on certain fundamental
conditions being met. In some cases, even where the parties have agreed on or
imposed certain conditions or features, these are in no way enforceable against
third parties, including the Respondent.
Only the real facts are to be taken into
account in determining whether or not a genuine contract of service existed.
Often, the facts have been falsified, disguised or even hidden, which is why
the Court must rely on the whole of the available tendered evidence. The only
relevant facts and information are those relating to the performance of work,
to the remuneration paid and to the existence or non-existence of a
relationship of subordination.
In other words, the intention of the
parties to a work agreement is in no way conclusive for the purpose of
characterizing that agreement as a contract of service. It is basically one
factor among many.
[14] Charron D.J.T.C.C., in Martineau v. Canada,
stated for his part:
Every agreement or arrangement providing
for terms and conditions of payment of remuneration on the basis not of the
time or period of performance of the remunerated work, but of other objectives
such as benefiting from the provisions of the Act vitiates the nature of
the contract of service.
Furthermore, there is no room for other
considerations such as generosity or convenience. It has often been said that
unemployment insurance is a social measure designed to assist those who
actually lose their employment and not a subsidy program to assist business or
benefit claimants who bend or alter the structure and terms and conditions of
payment of the remuneration which their work performance calls for.
Every agreement or arrangement to
accumulate or spread out hours has the effect of vitiating the contract of
service, particularly since this creates a contractual relationship which is
not very or not at all conducive to the existence of a relationship of
subordination, an essential component of a contract of service.
[15] The onus is on the Appellants to persuade
the Court that the Minister erred in finding that they did not hold insurable
employment within the meaning of the Act.
[16] In the instant case, the Appellants do not
deny any of the Minister's factual assumptions, other than that "the terms
of employment are an artificial
arrangement to enable the Payor to obtain two workers for the salary of one
person while the other person collected employment insurance benefits."
The Appellants argue that the arrangement was made in this way owing to special
circumstances having to do with the isolation of the hunting and fishing camp.
[17] On the one hand, we have the testimony of
the Appellants. We note that on certain points Ms. Comeau altered her version
of the facts when the Minister refused to recognize her employment as insurable
employment. On the other hand, we have an arrangement that, oddly enough, gives
the clear impression that an attempt was made to benefit wrongly from the Act.
It is of course permissible to take advantage of the Act. However, it is
not permissible to misrepresent reality in order to benefit from it. The Payor
could have paid each of the Appellants a weekly salary of $262.50 for six
months. The evidence has shown that the two janitors, the Appellants, were
working during both three-month periods. Consequently, the reality is that they
were each earning $262.50 per week for 40 hours of work. But that was not what
the Payor and the Appellants had agreed to, and even if it had been otherwise,
the Appellants would not have qualified for employment insurance benefits since
they would not have been unemployed. Had they nevertheless qualified, the
benefits would at the very least have been lower, since their salaries would
have been lower.
[18] The facts lead me to conclude that it is more
probable that the terms and conditions of employment were designed to
artificially take advantage of the Act. The courts have held that when
this is the situation, the contract of service is vitiated. Since the contract
of service is vitiated, there cannot be insurable employment within the meaning
of paragraph 5(1)(a) of the Act. There had to be evidence, on a
balance of probabilities, that the Appellants held insurable employment. The
Appellants have not discharged their burden of proof.
[19] The appeals are therefore dismissed.
Signed at Ottawa,
Canada, this 24th day of November 2003.
McArthur,
J.
Translation certified
true
on this 6th day of
March 2009.
Brian McCordick,
Translator
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