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Citation: 2003TCC812
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Date: 20031113
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Docket: 2003-697(EI)
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BETWEEN:
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EXTRA-KLEEN INC.,
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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: 2003-789(EI)
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AND BETWEEN:
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BERTHE CASAVANT,
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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
McArthur, J.
[1] The
appeals concern the insurability of work performed by the Appellant
Berthe Casavant for the business, Extra‑Kleen. The Appellants, Extra‑Kleen
and Berthe Casavant, claim that Berthe Casavant (the
"Worker") held insurable employment for the period from
3 December 2001 to 31 May 2003 at Extra‑Kleen Inc.
The Respondent argues that the Worker did not hold insurable employment at
Extra‑Kleen Inc. during this period within the meaning of
paragraph 5(1)(a) of the Employment Insurance Act (the
"Act").
[2] In concluding that
the Worker did not hold insurable employment, the Minister of National Revenue
("Minister") relied on the following facts:
[translation]
(a) the Appellant was
incorporated on or around 24 July 1980;
(b) the Appellant's
shareholders during the period at issue were as follows:
Berthe Casavant (the
Worker) 0.02%
Joséphat Casavant (the
Worker's husband) 0.87%
Florina Nauss (Joséphat
Casavant's sister) 0.02%
Russell Nauss (Florina's
husband) 44.58%
Natalie Nauss (Florina and
Russel Nauss' daughter) 43.89%
Norbert Savoie 10.62%
Total 100%
(c) Russell and
Florina Nauss live in Myrtle Beach, South Carolina;
(d) Russell Nauss performs the
Appellant's accounting work;
(e) the Worker's
husband is the Appellant's general manager, who monitors the Appellant's
operations and hires employees;
(f) the Appellant's
business involves the sale of sheet metal, nails, screws, doors, windows and
other materials purchased in surplus or damaged material sales;
(g) the Worker's
duties during the period at issue were to answer the telephone, feed and look
after the dog, run errands, stock merchandise, perform the inventory and do
bank deposits;
(h) the Worker
prepares and signs deposit slips throughout the year;
(i) the Appellant's
telephone rings at the business and residence of the Worker and her husband;
(j) the Worker's
husband answered the Appellant's telephone most of the time during the period
at issue;
(k) the Worker was
unable to handle heavy stock and had to ask her son for assistance;
(l) neither the
Worker's husband nor the other shareholders of the Appellant managed the
Worker's duties;
(m) during the period
at issue, the Worker had to look after the personal needs of her husband and
make him breakfast every morning, which would often take until 11:00 a.m.;
(n) the Worker was on
the payroll journal with a weekly salary of $400.00 for a 40-hour workweek;
(o) neither anyone
working for the Appellant nor the Worker knew how many hours per week the
Worker worked;
(p) during the period
at issue, the Worker's husband prepared most of the invoices;
(q) the Appellant is
open for business from May to November, and is run by the Worker's husband, his
son, Sylvain, and sometimes another employee;
(r) the Appellant
usually has no employees between November and May, except for the Worker's
husband, who is not always on the payroll during this period;
(s) no genuine
contract of service existed between the Appellant and the Worker.
For the most part, these assumptions are
well founded.
[3] At the hearing, it
was revealed that the Worker had been hired at a time when Extra‑Kleen was hiring experienced
workers. The Appellant's representative, Joséphat Casavant (the
Appellant's husband), explained that hiring his wife was more cost‑effective
for the Appellant. However, the Worker was paid $10 per hour, as were the
Appellant's other workers. Joséphat Casavant argued that the Appellant had
still saved money because:
[translation]
... Ms. Casavant worked in the winter
because business was slow and there was not enough money to pay high salaries
since the others work at least 50 hours per week, including Saturday and
Sunday. My wife worked 40 hours. ...
[4] In addition to the
testimony of the Worker and her husband and the payroll journal entries, no
other evidence supports the theory that the Worker worked 40 hours per
week. It cannot be established with certainty when the work was performed: from
Monday to Friday, from what time until what time?
[5] There is no
evidence showing that the Worker was paid for her work since no cheque issued
by the Appellant in the Worker's name was cashed. According to Joséphat Casavant's explanation, he
personally cashed the Worker's cheques by drawing on the company's cash assets:
[translation]
As proof of paid wages, the company always
has a petty "cash flow" and when there is not enough money to pay
wages, the company pays out in "cash" to honour the cheque, Your
Honour.
[6] Did Berthe Casavant hold insurable
employment within the meaning of the Act while working for Extra‑Kleen
Inc.?
[7] In Wiebe Door Services Ltd v. M.N.R., the Federal
Court of Appeal established four tests to determine whether a worker is an
employee or is self‑employed: (1) the control test, (2) the ownership of
tools, (3) the chance of profit or risk of loss, (4) the integration test.
[8] In 671122 Ontario Ltd. v. Sagaz Industries
Canada Inc., the Supreme
Court of Canada affirmed that the tests established in Wiebe Door Services
Ltd. are not a magic formula. It is important to maintain an overall
perspective and not to blindly apply these tests:
In my opinion, there is no
one conclusive test which can be universally applied to determine whether a
person is an employee or an independent contractor. Lord Denning
stated in Stevenson Jordan, supra, that it may be impossible to
give a precise definition of the distinction (p. 111) and, similarly, Fleming
observed that "no single test seems to yield an invariably clear and
acceptable answer to the many variables of ever changing employment relations
..." (p. 416). Further, I agree with MacGuigan J.A. in Wiebe Door,
at p. 563, citing Atiyah, supra, at p. 38, that what must always occur
is a search for the total relationship of the parties:
[9] In an employment
insurance case, Duplin v.
Canada,
Tardif, J. defined contract of service as follows:
On the matter
of insurability, I must basically decide whether the facts brought out in the
evidence show that there was a genuine contract of service during the period or
periods at issue. A genuine contract of service exists where a person performs
work that is defined in time and generally described in a payroll journal, in
return for which that person receives fair and reasonable remuneration from the
payer, which must at all times have the power to control the actions of the
person it is paying. The remuneration must correspond to the work performed for
a defined period of time.
. . .
The fundamental components of a contract of
service are essentially economic in nature. The records kept, such as payroll
journals and records concerning the mode of remuneration, must be genuine and
must also correspond to reality. For example, the payroll journal must record
hours worked corresponding with the wages paid. Where a payroll journal records
hours that were not worked or fails to record hours that were worked during the
period shown, that is a serious indication of falsification. Such is the case
where pay does not correspond with the hours worked. Both situations create a
very strong presumption that the parties have agreed on a false scenario in
order to derive various benefits therefrom, including benefits with respect to
taxes and employment insurance.
[10] Several decisions
have cited this definition of contract of service: Landry c. Canada, [2003] A.C.I.
no 341 (Q.L.), Bérubé c. Canada, [2003] A.C.I. no 188
(Q.L.), Livreur Plus Inc. c. Canada, [2002] A.C.I. no 579
(Q.L.), Nadeau c. Canada, [2002] A.C.I. no 513
(Q.L.).
[11] Tardif J. is of the view that any
arrangement intended to take advantage of the Act when no contract of
service really exists is at variance with the contract of service. The judge
states the following in Laverdière v. Canada:
Any agreement or arrangement setting out
terms for the payment of remuneration based not on the time or the period
during which the paid work is performed but on other objectives, such as taking
advantage of the Act's provisions, is not in the nature of a contract of
service.
. . .
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.
I share the same view as
Tardif, J., and I am using his words for the purpose of this decision.
[12] The words of Tardif, J. are consistent with those of the
Supreme Court of Canada in 671122 Ontario Ltd., supra. Beyond the
contract of service tests, one must not lose touch with reality. Is there
really a contract of service between the Appellant and the Worker?
[13] The Worker, Berthe Casavant, did not hold
insurable employment within the meaning of the Act. This conclusion is
based on Paragraph 5(1)(a) of the Act which stipulates that:
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.
[14] In applying the
tests in Wiebe Door
Services Ltd., supra, and in 671122 Ontario Ltd., I come to
the following conclusions: the Respondent took the position that no one oversaw
the Worker's work. Yet, the Worker explained that this was because she knew
what she had to do. The Worker would not have been able to decide which duties
to perform and which not to, or how to perform them. The Appellant determined
this in advance. Therefore, there was a certain degree of control over the
Worker's work.
[15] Ownership of tools: the Worker did not need tools as such to
perform her work: answering the telephone, feeding and looking after the dog,
running errands, stocking merchandise, performing the inventory and making bank
deposits.
[16] Chance of profit or
risk of loss: the Worker owned
a tiny percentage of the Appellant's shares (0.02 percent). We can assume that
she was eligible to receive dividends if they were paid to the shareholders.
(We have no information on the type of shares that the Worker owned.)
Furthermore, as a minority shareholder, the only loss that she could incur was
that of the purchase cost of her shares. Basically, she had little chance of
profit or risk of loss.
[17] The integration test
is of no help to us. The principal issue is to determine if the Worker works on
her own. The tests are simply evidence to which we can accord more or less
weight in a given situation in order to determine if the Worker was part of the
Payor's business or if she worked independently. The Respondent did not invoke
subsection 5(2) of the Act; it is clear, however, that the Worker assisted her
husband and that this was a situation in which parties are not dealing with
each other at arm's length.
[18] Despite the fact
that the employment at issue meets the tests, some key elements of the contract
of service are absent. Beyond these tests, is it possible, in fact, that there
was no contract of service?
This seems to be the case.
[19] Firstly, we have no
concrete proof, other than the payroll journal and the testimony of the Worker
and her husband, that the Worker worked 40 hours per week. Nothing in the
evidence indicates that these 40 work hours were actually worked. In Bouchard c. Canada, [1991] A.C.I. no
842 (Q.L.), the absence of a set schedule and evidence of the number of hours
worked had a major impact on the Court's decision:
[translation]
Counsel for the Respondent
argued that the Appellant had performed the accounting and had run errands but
there was no proof of the number of hours that she had worked. She did not have
a set schedule and her husband, who used to be away for two (2) to three (3)
days, was unable to exercise control.
The evidence is not sufficient to prove the
existence of a genuine contract of service between the Appellant and the
company:
(1) There is no
resolution from Pêcherie J.E. Lelièvre Inc. to hire the Appellant;
(2) The documents
produced show little indication of work performed by the Appellant;
(3) The absence of
control on the part of the company;
(4) No set schedule
and no record of the number of hours actually worked.
For these reasons, the appeal
is dismissed.
[20] Secondly, we have no evidence that the
Worker's paycheques were cashed. Joséphat Casavant affirmed that he took
the Worker's cheques and paid her the amounts in cash from the Appellant's cash
assets. No evidence in this sense was given to the Court and no record of these
cash outflows was filed. In Bourgouin c. Canada, [2001]
A.C.I. no 558 (Q.L.), there was also the issue of
paycheques endorsed by the Worker and cash paid in exchange for cheques. Here
is what the Court concluded on the subject at paragraphs 23 to 25:
[translation]
The Appellant endorsed the cheques signed
by Yvan Millette, gave them back to him and, in return, received these
wages. Those cheques had to be drawn on Yvan Millette's personal bank
account, or that of Gestion Micoraba Ltée, while Gestion Micoraba Ltd. had been
assigning debts.
No evidence was submitted showing that
Yvan Millette was solvent during that period. How could he honour these
cheques?
The Appellant submitted no concrete proof:
she only made claims. Under the circumstances, a simple testimony cannot
demonstrate on the balance of probabilities that a genuine contract of service
existed between the parties for the period from 18 July 1999 to
10 September 1999.
[21] In the absence of fundamental
evidence, I conclude that the Worker did not hold insurable employment because
she was not working for the Appellant under a contract of service. No concrete
evidence as to the Worker's schedule or the number of hours actually worked by
the latter was filed before the Court. No evidence concerning the cashing of
the Worker's paycheques through Joséphat Casavant
was brought forward. The testimony of the Worker and her husband alone do not
make a strong case on a balance of probabilities. Accordingly, the appeals are
dismissed.
Signed at Ottawa, Canada, this 13th
day of November 2003.
McArthur,
J.
Translation certified true
on this 2nd day of February 2004.
Maria Fernandes, Translator
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