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Citation: 2003TCC313
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Date: 20030509
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Dockets: 96‑2427(UI)
1999‑4382(EI)
1999‑4386(EI)
1999‑4391(EI)
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BETWEEN:
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LYNE PÉRUSSE,
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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
Angers, J.T.C.C.
[1] These
appeals were heard on common evidence at New Carlisle, Quebec. They
are appeals from decisions of the Minister of National Revenue (the
"Minister") that the Appellant did not hold insurable employment with
Guy Cavanagh (the "Payor") during the periods from June 22
to September 11, 1992, from May 3 to July 23, 1993,
from April 18 to July 8, 1994, from April 10 to July 7, 1995,
and from March 4 to May 31, 1996, in Docket 96‑2427(UI)
(hereinafter "2427"); from January 6 to May 30, 1997,
in Docket 1999‑4382(EI) (hereinafter "4382"); and from
June 16 to December 26, 1997, in Docket 1999‑4386(EI)
(hereinafter "4386"). Docket 1999‑4391(EI)
(hereinafter "4391") is an appeal from a decision of the
Minister that the Appellant did not hold insurable employment with 9055‑2159
Québec Inc. (hereinafter "9055 Qué. Inc."),
during the period from December 29, 1997, to May 29, 1998.
[2] In
Docket 2427, the Minister determined that the Appellant's employment
during the periods at issue was not insurable under paragraph 3(2)(c)
of the Unemployment Insurance Act (UIA), because the
Appellant and the Payor were not dealing with each other at arm's length and,
if they had been dealing with each other at arm's length, the terms and
conditions of employment would not have been the same.
[3] In
rendering his decision in this case, the Minister relied on the following
assumptions of fact, which the Appellant admitted or denied as indicated:
[translation]
(a) The Payor practises law
without a partner; (denied)
(b) He employs
two legal secretaries, one who works approximately 35 weeks per year
and one who works approximately 18 weeks per year; (admitted)
(c) The Appellant
is the Payor's common‑law spouse; (admitted)
(d) They have
three children who were ten, seven and four years of age in the summer of
1996; (admitted)
(e) The Appellant
has worked for the Payor as an office clerk since 1987; (admitted)
(f) Her duties mainly
consisted of:
bookkeeping,
preparing annual
financial statements,
preparing income tax
returns,
preparing statistics;
(denied)
(g) She worked
full‑time for 11 to 13 weeks per year and four hours per
week for the remainder of the year; (admitted)
(h) She received
weekly remuneration of $700, for 32.5 hours of work in 1992 and 1993, and for
35 hours the following years; (denied)
(i) She earned
$80 for weeks in which she worked four hours; (admitted)
(j) The legal
secretaries earned $350 to $400 per week for weeks of 32.5 to 35 hours; (admitted)
(k) The Appellant
claims to have spent three weeks full‑time preparing the income tax
returns, whereas, employed full‑time on June 22, 1992,
May 3, 1993, and April 18, 1994, the Payor's federal tax
returns for 1991, 1992 and 1993 were filed on April 30, 1992,
April 12, 1993 and April 29, 1994; (denied)
(l) The Payor's
financial statements show the following income:
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Gross Income
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Net Income
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As at 30/6/92
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$130,965
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$34, 009
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As at 30/6/93
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$106,982
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$19, 645
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As at 30/6/94
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$105,396
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$13, 796
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As at 30/6/95
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$141,630
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$50,740
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(admitted)
(m) The
Appellant's duties did not require the hiring of a full‑time employee for
10 to 13 weeks per year; (denied)
(n) The number of
workweeks for each of the years at issue correspond to the minimum number of
weeks the Appellant required to qualify for unemployment insurance benefits; (denied)
(o) For each
period, she received unemployment insurance benefits until the day on which she
started working full‑time again; (admitted)
(p) The
Appellant's salary was too high for her assigned duties; (denied)
(q) The Appellant
had a de facto non‑arm's length relationship with the Payor
under the Income Tax Act for the period at issue from
June 22 to September 11, 1992, in view of the aforementioned
circumstances; (denied)
(r) In addition,
for the subsequent periods at issue, it is not reasonable to conclude under the
aforementioned circumstances that the Appellant would have entered into a
substantially similar contract of employment if she had been dealing with the
Payor at arm's length. (denied)
[4] In
Docket 4382, the Minister determined that the Appellant's employment
during the period at issue was not insurable under paragraph 5(2)(i)
and subsection 5(3) of the Unemployment Insurance Act
("UIA") because the Appellant and the Payor were not dealing with
each other at arm's length and, upon examining the terms and conditions of
employment, that the parties would not have entered into a substantially
similar contract if they had been dealing with each other at arm's length.
[5] In
rendering his decision in this case, the Minister relied on the following
assumptions of fact, which the Appellant admitted or denied as indicated:
[translation]
(a) The Payor has
operated a general law office since July 13, 1987, and since
July 13, 1992, he has also operated a financial planning office. (admitted)
(b) On
October 3, 1997, following the incorporation of "9055‑2159 Québec Inc.,"
the Payor's operations were split: Guy Cavanagh operates the general law
office and the corporation operates the financial planning and management
office. (admitted)
(c) The Payor has
a business office in New Richmond, Quebec, and when his law office opened
in 1997, he hired the Appellant, his common‑law spouse, as an office
clerk. (admitted)
(d) The Payor operates his
law office year round. (admitted)
(e) From 1987 to
1992, the Appellant held the position of office clerk on a continuous part‑time
or full‑time basis. (admitted)
(f) From 1992 to
May 30, 1997, including the period at issue, the Appellant held the
positions of office clerk, on a continuous part‑time or full‑time
basis, and of financial planning assistant during the full‑time periods. (admitted)
(g) For the
period at issue, the Appellant was listed on the Payor's payroll for 18 full‑time
weeks, at $700 gross per week, and for two part‑time weeks, at $80
per week. (admitted)
(h) During the
period at issue, the Appellant received a fixed weekly salary of $700 for
32.5 hours per week (in the summer) or 35 hours per week during the
remaining weeks; when she worked part‑time, she worked four hours
per week and she received a weekly salary of $80. (admitted)
(i) The Payor
supervised the Appellant regardless of whether she was working as an office
clerk or planning assistant. (admitted)
(j) During the
period at issue, the Payor hired Ms. Josée Audet as a legal
secretary; she received weekly remuneration of $420 for 35 hours of work. (admitted)
(k) The Payor
also employed Ms. Louisa Bujold as a legal secretary, from the
beginning of June until the end of November 1997, paying her $420 per week
for 32.5 or 35 hours per week. (admitted)
(l) The
Appellant was laid off on May 30, 1997, and the Payor hired
Ms. Bujold full‑time upon the Appellant's departure. (admitted)
(m) Unlike the
two legal secretaries he hired exclusively for the full‑time
periods, the Payor could list the Appellant as full‑time or part‑time.
(admitted)
(n) The Appellant
received weekly remuneration of $700, whereas the two legal secretaries
received weekly remuneration of $420 for the same number of hours. (admitted)
(o) The Appellant
was listed on the Payor's payroll as part‑time, full‑time or was
laid off regardless of the Payor's periods of activity or income. (denied)
(p) The Appellant
rendered services to the Payor year round; however, she was only paid for
certain periods. (denied)
[6] In
Docket 4386, the Minister determined that the Appellant's employment
during the period at issue was not insurable, for the same reasons as those for
Docket 4382. In rendering his decision, the Minister relied on the
following assumptions of fact, which the Appellant admitted or denied as
indicated:
[translation]
(a) The Payor has
operated a general law office since July 13, 1987, and since
July 13, 1992, he has also operated a financial planning office. (admitted)
(b) On
October 3, 1997, following the incorporation of "9055‑2159 Québec Inc.,"
the Payor's operations were split: Guy Cavanagh operates the general law
office and the corporation operates the financial planning and management
office. (admitted)
(c) The Appellant
worked for the Payor's law office until December 26, 1997, and she
started being paid by the corporation on December 29, 1997. (admitted)
(d) The Payor has
a business office in New Richmond, Quebec, and when his law office opened
in 1987, he hired the Appellant, his common‑law spouse, as an office
clerk. (admitted)
(e) The Payor operates his
law office year round. (admitted)
(f) From 1987 to
1992, the Appellant held the position of office clerk on a continuous part‑time
or full‑time basis. (admitted)
(g) From 1992
until the end of November 1997, the Appellant held the positions of office
clerk, on a continuous part‑time or full‑time basis, and of
financial planning assistant during the full‑time periods; starting on
January 1, 1997, the Appellant also performed secretarial work. (admitted)
(h) During the
period at issue, the Appellant was listed on the Payor's payroll as follows:
- From
June 16 to November 28, 1997: four hours per week, except
for the week of September 1‑5, for which 6 hours were listed.
- From
December 1‑19: full‑time, 40 hours per week.
- From
December 22‑26: four hours.
(denied)
(i) During the
period at issue, the Appellant received a fixed weekly salary of $700 for
32.5 hours per week (in the summer) or 35 hours per week during the
remaining weeks; as of December 1, 1997, her hours increased to
40 hours per week; when she worked part‑time, she received a salary
of $20 per hour. (admitted)
(j) The Payor
supervised the Appellant regardless of whether she was working as an office
clerk or planning assistant. (denied)
(k) From January
to the beginning of June 1997, the Payor hired Josée Audet as a legal
secretary; she received weekly remuneration of $420 for 35 hours of work. (admitted)
(l) During the
period at issue, the Payor hired Louisa Bujold as a legal secretary, from
the beginning of June until the end of November 1997, paying her $420 per
week for 32.5 or 35 hours per week. (admitted)
(m) The Appellant
was laid off on May 30, 1997, and the Payor hired Ms. Bujold
full‑time upon the Appellant's departure. (admitted)
(n) Unlike the
two legal secretaries he hired exclusively for the full‑time
periods, the Payor could list the Appellant as full‑time or part‑time.
(admitted)
(o) The Appellant
received weekly remuneration of $700, whereas the two legal secretaries
received weekly remuneration of $420 for the same number of hours. (admitted)
(p) The Appellant
was listed on the Payor's payroll as part‑time, full‑time or was
laid off regardless of the Payor's periods of activity or income. (denied)
(q) The Appellant
rendered services to the Payor year round; however, she was only paid for
certain periods. (denied)
[7] Finally,
in Docket 4391, the Minister determined that the Appellant's employment
during the period at issue was not insurable, for the same reasons as in
Dockets 4382 and 4386, except that in this case, the Payor is
9055 Qué. Inc., the only share of which is held by
Fiducie ACMAP, of which Mr. Cavanagh is the sole director. In
rendering his decision, the Minister relied on the following assumptions of
fact, which the Appellant admitted or denied as indicated:
[translation]
(a) Guy Cavanagh
has operated a general law office since July 13, 1987, and since
July 13, 1992, he has also operated a financial planning office. (admitted)
(b)
On
October 3, 1997, following the incorporation of the Payor,
Mr. Cavanagh's operations were split: Guy Cavanagh operates the
general law office and the Payor operates a financial planning and management
office. (admitted)
(c) The Payor's
sole shareholder is Fiducie ACMAP, which holds the only
Class "A" common voting share; Mr. Cavanagh is the sole
director of the trust, the beneficiaries of which are the three minor
children of Mr. Cavanagh and the Appellant. (admitted)
(d) The Appellant
worked for Mr. Cavanagh's law office until December 26, 1997,
and she started being paid by the Payor on December 29, 1997. (admitted)
(e) As of
December 29, 1999, the Appellant performed all of the duties previously
associated with Mr. Cavanagh's law office, as well as the same duties for
the Payor. (admitted)
(f) As of
December 29, 1997, Mr. Cavanagh's law office no longer engaged
personnel, because from that point on the Payor assumed its management. (admitted)
(g) Mr. Cavanagh
has a business office in New Richmond, Quebec, and when his law office
opened in 1987, he hired the Appellant, his common‑law spouse, as an
office clerk. (admitted)
(h) Mr. Cavanagh's
law office and the financial planning and management office are operated
year round. (admitted)
(i) From 1987 to
1992, the Appellant held the position of office clerk on a continuous part‑time
or full‑time basis for Mr. Cavanagh. (admitted)
(j) From 1992
until the end of November 1997, the Appellant held the positions of office
clerk, on a continuous part‑time or full‑time basis, and of
financial planning assistant during the full‑time periods; starting on
January 1, 1998, the Appellant also performed secretarial work. (denied)
(k) During the
period at issue, the Appellant was listed on the Payor's payroll as follows:
- From
December 29, 1997 to January 2, 1998, for a total of
four hours.
- From
January 5 to May 29, 1998, full‑time, 40 hours per
week.
(denied)
(l) During the
period at issue, the Appellant received a fixed weekly salary of $700 for
40 hours per week; when she worked part‑time, she received a salary
of $20 per hour. (admitted)
(m) The Payor
supervised the Appellant regardless of whether she was working as an office
clerk or planning assistant. (admitted)
(n) Mr. Cavanagh
hired Louisa Bujold as a legal secretary, from the beginning of June until
mid‑October, paying her $420 per week for 32.5 or 35 hours per week.
(admitted)
(o) Unlike the
two legal secretaries Mr. Cavanagh hired exclusively for the full‑time
periods, he could list the Appellant as full‑time or part‑time. (admitted)
(p) The Appellant
received weekly remuneration of $700, whereas the two legal secretaries
received weekly remuneration of $420 for the same number of hours. (admitted)
(q) The Appellant
was listed on the Payor's payroll as part‑time, full‑time or was
laid off regardless of the Payor's periods of activity or income. (denied)
(r) The Appellant
rendered services to Mr. Cavanagh and to the Payor year round;
however, she was only paid for certain periods. (denied)
[8] In
all of these appeals, the Appellant maintains that paragraph 3(2)(c)
of the UIA, as well as paragraph 5(2)(i) and subsection 5(3)
of the EIA are discriminatory and infringe the right to equality guaranteed
under section 15 of the Canadian Charter of Rights and Freedoms ("Charter"),
which reads as follows:
15.(1) Every individual is equal before and under the
law and has the right to the equal protection and equal benefit of the law
without discrimination and, in particular, without discrimination based on
race, national or ethnic origin, colour, religion, sex, age or mental or
physical disability.
[9] It
is important to note that Docket 2427 involves a new trial held in
accordance with a Federal Court of Appeal judgment dated March 10, 2000.
The Federal Court of Appeal ruled on the constitutional issue raised by the
Appellant and it concluded that there was no breach of subsection 15(1) of
the Charter. In this case, the Appellant not only raised this issue during the
new trial, which was ordered by the Federal Court of Appeal, but also
during the subsequent appeals before this Court. In this case, notice was given
to the federal and provincial Attorneys General, in accordance with the Federal Court Rules.
I will come back to the constitutional issue later in my reasons.
[10] The fact that the Appellant and the Payor are common‑law spouses
is admitted for all of the periods at issue. Thus, there was a non‑arm's
length relationship between them during these years, including those in which
the Payor was a corporation controlled by Mr. Cavanagh. In 1992, the Act
did not refer to common‑law spouses. Thus, the Minister argues that
during this year, there was a de facto non‑arm's length
relationship. As the Appellant admitted, she and the Payor have
three children, who were ten, seven and four years of age in the
summer of 1996.
[11] The Payor has been practising law since 1982 and he operates a
forestry business. In 1987, he opened his own office and hired one full‑time
legal secretary. Needing someone to do the bookkeeping and to perform other
accounting duties for his law office and his business, he decided, upon
consultation, that it would be less expensive for him to pay someone 18 to
20 dollars per hour to work on‑site than it would be to hire an
accounting firm at a cost of 50 dollars per hour. Therefore, he decided to
hire his spouse. The latter has a Doctorate in Industrial Relations from
Université Laval; she was doing contract work for the university at the time
and she was earning between $700 and $1,000 per week. He not only felt that his
spouse could provide technical assistance, he also believed that her training
could be useful to him when dealing with cases involving the negotiation of collective
agreements or the CSST. Thus, she became a resource person. She has worked a
number of weeks a year for the Payor since 1987. During the years at issue in
these appeals, she worked for eleven weeks in 1992, twelve weeks in
1993 and 1994, thirteen weeks in 1995 and 1996, twenty‑one weeks
in 1997, thirty‑one weeks in 1998 and forty‑three weeks in
1999. The number of hours worked per week varied between thirty‑two and
thirty‑five hours. For the remainder of the year, the Appellant
worked four hours per week, at an hourly rate of twenty dollars. She
has worked full‑time since 2000.
[12] The Payor testified that he had wanted to hire the Appellant for the
entire year during the years at issue in these appeals; however, this was not
feasible due to his sales figures. In this regard, he filed Exhibit A‑1,
showing his total gross income for each of the years at issue, including the
years in which he incorporated his company and began providing financial
planning services.
[13] When she was hired in 1987, the Appellant was paid $530 per week. For
all of the periods at issue, her salary was $700 per week. She was paid
$20 per hour during the weeks in which she worked four hours. According to
the Payor, the Appellant was an important resource person in addition to having
the necessary accounting skills. Her salary was set upon consultation with an
accounting firm.
[14] The Payor filed in evidence the Appellant's curriculum vitae, the
activity report that the Appellant prepared and her degree. Then he summarized
the work she performed during each of the periods at issue.
[15] In 1992, the Appellant's mandate was to redo the billing for a number
of the Payor's cases in order to specify the time he had spent on those cases.
In addition, she helped the Payor with other cases and she did the accounting.
During the eleven weeks that she worked, her hours of work were from
8:30 a.m. to noon and from 1:30 p.m. to 4:30 p.m. During this
period, she performed her work at the office. The Payor emphasized that during
all of the periods at issue, the Appellant did not receive any employment
benefits other than those set out by law, as was the case with his other
employees.
[16] The Payor explained that during 1993, 1994 and 1995, the Appellant
came to work for him to meet the needs of his law office and to help him with
some of his cases. When he became a financial planner, the Appellant's workload
increased, which explains the increase in the number of workweeks until 1997.
She had to prepare questionnaires and perform other duties relating to the
financial planning services the Payor provided. She continued to do the
accounting and she worked as a legal secretary in December 1997. He
explained that the Appellant was three employees in one. During the last
period at issue, she worked thirty‑one weeks to complete the duties the
Payor had assigned her. During the last period, the incorporation of 9055‑2159 Québec Inc.
created extra work for the Appellant, which explains her additional workweeks.
[17] On cross‑examination, the Payor testified that he spent
approximately 25% to 30% of his time on financial planning services and that
this percentage remained the same from 1992 to 1998. His services in this area
are mainly associated with his law practice cases concerning separations,
claims for damages and debt management for his clients. He explained that, when
she was at the office, the Appellant's work consisted of analyzing financial
data with him. Furthermore, he specified that he analyzed the data alone in her
absence. He obtained information from clients; subsequently, the Appellant
prepared the necessary balance sheets and financial statements. He acknowledged
that the Appellant is not a financial planner and that there were no off‑peak
periods during the year. This work was continuous, although some months were
busier than others.
[18] The Payor still had a full‑time legal secretary. Their hours of
work were the same as those of the Appellant and their salary varied between
$350 and $400 per week. The legal secretaries' work was shared between
two employees who were sharing the weeks. They never worked at the same
time. One of the legal secretaries had a college diploma and the other had
completed three years of studies.
[19] Exhibit I‑1, tab 15, is the Appellant's request with regard
to the insurability of her employment in Docket 2427, for the periods from
1992 to 1995. The Appellant's position title is office clerk. In this
document, she described the duties she was required to carry out during the
four‑hour workweeks and her duties for the weeks in which she worked full‑time.
The duties the Appellant was required to carry out on a continuous basis, that
is, four hours per week, included accounts receivable, accounts payable,
quarterly GST and QST reports, payroll, bookkeeping, human resources management
and bookkeeping for the trust account. The duties to be performed during the 35‑hour
workweeks, or 32.5‑hour weeks in the summer, included preparing income
tax returns, financial statements and statistics, updating various aspects of
the Payor's practice, human resources management, special studies such as
surveys, and remaining current in terms of computers and financial planning.
[20] The Payor acknowledged that he communicated with his debtors
personally, in spite of the fact that, according to Exhibit I‑1,
tab 15, this duty was assigned to the Appellant. He was unable to specify
when the Appellant completed her duties when she worked part‑time, that
is, four hours per week. He referred to one four‑hour evening per
week. Subsequently, he acknowledged that the time sheets in Exhibit I‑1,
tab 33, indicated one hour per evening, four evenings per week. He
said that he talked to the Appellant to decide which evening she had to work.
In the end, he admitted that her schedule was flexible. The Payor was unable to
determine the amount of time required to complete each of the duties the
Appellant performed when she worked four hours per week; the time
specified was an estimate of the amount of time spent on each task.
[21] With regard to the duties performed year round, he was unable to
specify the amount of time spent on each of the duties described. He
acknowledged that the income tax returns had to be completed prior to
May 1 every year. The financial statements had to be ready by
March 30 every year, and after 1996, they had to be ready by
December 31 every year.
[22] Statistical information was used to divide the various fields of the
Payor's practice and to identify the clients' place of residence in order to
target advertising more effectively. However, for 1992‑1998, he could not
say during which years the statistics at issue had been prepared. The Payor
admitted that the Appellant collected less data over the years, due to her
workload. The Payor could not identify the amount of time devoted to this
heading.
[23] The Payor admitted that the Appellant had to complete the duties
listed under the heading [translation]
"updating" during her four‑hour workweeks rather than when she
worked full‑time, as it was necessary to complete these duties year
round. They included accounts receivable, credit card accounts and the filing
of invoices. In spite of this admission, the Payor maintained that the
Appellant did not accumulate the work that should be done when she was working
part‑time in order to do it when she was working full‑time.
[24] The heading [translation]
"Human Resources Management" is a duty that the Appellant performed
when she worked full‑time. The Payor testified that this mainly involved
ensuring the quality of the written and spoken French used at the office. He
testified that he performed this duty in the Appellant's absence. He confirmed
that the Appellant was responsible for occupational health and safety and he
gave as an example that she was responsible for the height of the chairs and
computer screens. He stated that the Appellant evaluated the secretary on a
daily basis.
[25] The Payor was unable to describe what the heading [translation]
"special studies" involved, except he remembered that in 1992,
the Appellant had drafted a report for one of his clients, which apparently
required one to two workweeks to complete.
[26] The second last heading of annual duties performed during the
Appellant's full‑time work periods is entitled [translation] "Information on New Developments."
The Payor testified that in 1996 he asked the Appellant to study accounting software for his law office. He
could not specify the amount of time she spent on this task and the project was
later abandoned.
[27] The Payor testified that in 1993, he asked the Appellant to study a
training course on financial planning. Already holding the title of financial
planner, he wanted to upgrade his skills so that in 1997, he was able to
introduce himself as such. The Appellant's work consisted of studying and
summarizing the content of two volumes entitled
"Successful Investing & Money Management." The Payor
claimed to have studied them as well. The Appellant performed the work;
however, she spread it out over three years, that is, from 1993 to 1995.
She performed the work during the full‑time employment periods.
[28] In 1996, the Payor enrolled in a course entitled [translation] "Personal Financial
Planning Synthesis" provided by the Institut québécois de planification
financière. It involved the scheduled study and submission of a series of
modules; it also involved studying two cases submitted by the Institut.
Although she was not enrolled in the course, the Appellant studied and prepared
each of the modules for the Payor. The first module was submitted on
February 14, 1996, and the last one was submitted on
June 28, 1996. Furthermore, in 1997 and 1998, the Appellant prepared
a checklist, questionnaires and forms, making it easier to open files and
compile information obtained from the Payor's clients. On
January 29, 1997, the Payor received his certification as a financial
planner.
[29] From December 1‑19, 1997, the Appellant replaced the
Payor's secretary. Subsequently, the Payor's corporation hired her for the
period from January 6 to May 30, 1998, to perform her usual
duties. Josée Audet was the secretary during the same period. According to
the Payor, the Appellant was laid off on May 31, 1996, and on
May 30, 1997, because her services were no longer required. However,
he could not explain why the layoffs occurred on those dates. He claimed that
the Appellant worked based on the requirements of his office.
[30] On cross‑examination, Counsel for the Respondent inquired about
the Payor's net income for each of the years at issue. The amounts in question
are as follows.
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Year
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Gross Income
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Net Income
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1992
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$154,507
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$47,016
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1993
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$96,180
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$21,807 ($27,212 following the
audit)
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1994
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$99,180
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$23,833 ($29,989 following the
audit)
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1995
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$164,147
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$34,953 ($46,352 following the
audit)
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1996
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$108,499
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|
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1997
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$111,225
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$26,435
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1998
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$154,192
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$48,403
|
[31] The Appellant testified that she was hired by her common‑law
spouse, the Payor, when his office opened in 1987, to help organize the law
office. At that time, her salary was set at $530 per week. In 1990, she
earned $640 per week, and during the periods at issue, she earned $700 per
week. For the purposes of this case, the Appellant filed in evidence a summary
of the duties she performed for the Payor for each of the periods at issue.
This document is filed as Exhibit A‑8.
[32] According to her testimony and the summary at issue, the Appellant was
responsible for regular and continuous duties, which she performed
four hours per week during most of the periods. During the thirty‑two
and thirty‑five hour workweeks, it seems as though the Appellant was
assigned to specific projects, in addition to her regular work that required
four hours per week.
1992
[33] The period of employment at issue is June 22 to September 11, 1992,
or eleven weeks. This work period was necessary in order to carry out the
duties associated with the fiscal year end, June 30. The Appellant
testified that she also worked on the Payor's cases. In one particular case, her
abilities made it possible to resolve the issue at hand. In addition, the
Appellant had to redo the billing for a number of the Payor's cases, some of
which required one month of work. In September 1992, the Payor acquired
the title of financial planner and the Appellant had to make the appropriate
preparations. She also spent time organizing the Payor's library.
1993
[34] The period is May 3 to
July 23, 1993, or twelve weeks. The fiscal year still ended on
June 30 and the Appellant prepared annual financial statements. During her
full‑time work period, the Appellant studied and summarized the first
seven lessons of the Hume Publishing Company Ltd. study program
(Exhibit A‑6) entitled "Successful Investing & Money
Management." The Appellant claimed that she had to become familiar with
financial planning in order to provide services to the law office's clientele.
Thus, she had to update her skills. As a result, she summarized various
economic indicators as well as certain documents for the Payor. Furthermore,
the Appellant performed this work during the periods from 1993 to 1995. In
addition, she explained the amount of time she spent on each of her duties when
she worked part‑time.
1994
[35] The period is April 18 to July 8, or twelve weeks.
During the weeks in which she worked full‑time, her work consisted of
studying and summarizing lessons 8 to 15 of the Hume study program,
continuing her training in economics and summarizing texts.
1995
[36] The period is April 10 to July 7, or
thirteen weeks. She completed the same two duties as in 1994, that
is, studying and summarizing lessons 16 to 19 and lesson 26
of the Hume study program, and continuing her economics training. According to
the Appellant, the Payor told her that it was not necessary to complete
lessons 27 to 31 of the program. In 1995, the Appellant had
to prepare two financial statements because the fiscal year‑end date
had changed.
1996
[37] The period is March 4 to May 31, or
thirteen weeks. During this full‑time work period, the Appellant had
to become familiar with tax and financial planning in order to provide services
to the law office. The Appellant and the Payor had to complete
thirteen modules, study two cases and summarize the modules during
the period from February 5 to May 30. Thus, they completed
this work together; in addition, she continued her training in economics and in
financial mathematics methods.
1997
[38] The period is January 6 to January 24, for
four hours per week, and January 27 to May 30, full‑time,
or eighteen weeks. As Exhibit A‑3, the Appellant filed in
evidence an activity report for this period. The Payor's financial planning
service was established at the beginning of 1997. Thus, the Appellant prepared
standard forms for opening files and for collecting information from clients to
develop strategies; in short, she prepared everything necessary to providing
the services. In addition, the Appellant wrote newspaper advertorials.
[39] The Appellant returned to work full‑time from December 1‑19, 1997.
She carried out her duties as office clerk and she worked as a legal secretary,
because Ms. Bujold had to leave the office. Thus, she had agreed to assist
the Payor during this period.
[40] On October 3, 1997, the Payor formed a management company,
9055 Que. Inc., which did not start doing business until
January 1, 1998. Thus, during the period from
December 29, 1997, to May 29, 1998, the Appellant worked
for this company for one four‑hour workweek and for twenty‑one
forty‑hour workweeks. She returned to work from June 15 to
October 16, 1998. She performed three functions during the
period at issue: office clerk, financial planning assistant and legal
secretary.
[41] The Appellant testified that she has seen all kinds of things since
1993. Prior to that year, she was entitled to unemployment/employment insurance
benefits, as were all Canadian citizens. Ever since amendments to the Act
changed the insurability of employment in cases involving a non‑arm's
length relationship, the Appellant has been denied this benefit. Now, she must
satisfy the Minister that an actual contract of service exists and that the
terms and conditions of employment are no different than they would be for an
unrelated person. The Appellant explained that when she went to the Human
Resources Development Canada office in 1993, she was reminded to indicate that
she had been hired by her spouse. Apparently, the individual made this remark
in a dry, reproachful tone of voice, as the individual was acquainted with the
Appellant.
[42] In addition, the Appellant testified that she was outraged by the
comments appearing in the report of Jean Blais, an insurability officer
with Human Resources Development Canada. This comment alluded to the fact
that people would like to work for their spouse for 10 to 12 weeks.
The Appellant described the difficulties she had encountered in her efforts to
find employment and she explained the reality that women face in securing
employment in the Gaspé Peninsula. In addition, the Appellant described a
conversation with Gilles Turgeon, an Appeals Officer with CCRA, concerning
the fact that she worked for her husband who is an attorney. The Appellant felt
as though this meant she did not need unemployment insurance benefits.
[43] In addition, Jean Blais's report points out that the fact that
the Payor is representing the Appellant free of charge is a determining factor
with regard to a non‑arm's length relationship. She was humiliated by
these comments. Overall, she argued that the officers' work was not carried out
in accordance with established practice and that they did not review her case
objectively.
[44] On cross‑examination, the Appellant seemed somewhat uncertain
with regard to the amount of time required to prepare the financial reports and
to collect the information required for their preparation, both for the Payor's
law office and for their forestry and farm businesses. She was also uncertain
as to whether or not this work was carried out when she was working part‑time
or full‑time. In addition, the Appellant acknowledged that during the
periods in which she worked part‑time, she performed her duties at her
home after the children were in bed.
[45] Furthermore, the Appellant was unable to specify how her time was
divided between her duties as a legal secretary, and those as a financial planning
assistant and an office clerk during the years at issue. In addition, she was
unable to specify the amount of time she spent studying the thirty‑one lessons
of the Hume study program, or the reason it took her three years to do so,
as well as summarizing an economics book that the Payor had not read. It is
important to note that all of the Appellant's applications for
unemployment/employment insurance benefits indicate a lack of work as the
reason for separation.
[46] Gilles Turgeon is the Appeals Officer who was responsible for the
Appellant's case for the periods from 1992 to 1996. This case was forwarded to
him following a disagreement with regard to a ruling made by an officer from
Human Resources Development Canada concerning the insurability of the
employment. He received the Appellant's file for the periods from 1992 to 1995
in June 1996, and two weeks later, he received the file for 1996. He
obtained the agreement of the Payor, who is also Counsel for the Appellant, to
the effect that the interviews and information collected for the
four years at issue also apply to 1996. He obtained this agreement through
a discussion with the Payor on July 24, 1996.
[47] Mr. Turgeon filed his report in evidence. He interviewed the
Appellant and the Payor, as well as the other stakeholders in the case. In
addition, he consulted a statistician, an attorney and an auditor at the
Revenue Canada office. He reviewed the documentation relevant to the case
and he analyzed the time that the Appellant may have devoted to her duties.
This information was obtained through interviews with the Appellant and the
Payor, and mainly concerned task‑sharing between the part‑time work
periods and the full‑time work periods and the periods of the year during
which certain tasks were completed, such as taxes, as well as the amount of
time devoted to these tasks. He submitted this information to his consultants
for the purpose of conducting a comparative analysis.
[48] Furthermore, Mr. Turgeon reviewed the Appellant's salary, comparing
it to the duties she performed, and he compared the entire situation having
regard to the size of the business and the salary paid to other office
employees in the province of Quebec. He questioned the duration of employment
during the periods from 1992 to 1996, when it might have been more logical
to hire the Appellant part‑time year round, and full‑time during
peak periods, particularly since the business is operated year round. He also
questioned the nature and importance of the work, as his analysis led him to
determine that it was not necessary to use the accounting services of a full‑time
employee for ten to thirteen weeks from year to year.
[49] On cross‑examination, Mr. Blais's competence and the way in
which he carried out his work were called into question, as was the lack of
resources the department made available to him. Mr. Blais denied
suggesting that he would like to have the Appellant's job, claiming that such a
comment would not be appropriate at the start of such an investigation.
[50] Jean‑Pierre Gauthier is a CGA who works as an auditor for
the Canada Customs and Revenue Agency. He was mandated to analyze the
Appellant's duties as well as the Payor's accounting system, and to audit the
Payor's income tax returns for 1992 to 1995 inclusive. He met with the
Payor and spent three and a half days at the Payor's office. Based on his
analysis, he determined that the Payor's accounting, both at the law office and
at the forestry business, would require a fast, experienced employee to work part‑time,
ten hours per week. Mr. Gauthier did not analyze the time the
Appellant may have spent working as a financial planning assistant.
[51] Jean Vézina is the Appeals Officer who was responsible for the
periods at issue in 1997 and 1998. He filed his reports in evidence and
testified concerning their content. He had telephone conversations with the
Payor (Counsel for the Appellant) in which the Payor confirmed that the
Appellant performed the same work from January to May 1997 as she had
during the preceding years. The Payor informed the officer that the extra
duties were added to her existing duties, that is, those of a legal secretary.
Mr. Vézina was informed that a management company had been formed, the
sole shareholder of which is a trust that is managed by the Payor. In addition,
Mr. Vézina examined the documentation used by
Appeals Officer Jean Blais during the prior periods.
[52] On cross‑examination, it was revealed that the witness is not a
task analysis specialist and that his employer does not provide him with any
means of evaluating and analyzing this factor.
[53] In this case, the Appellant must show, on a balance of probabilities,
that the Minister exercised his discretion improperly in determining that,
having regard to all the circumstances, the Payor and the Appellant would not
have entered into a substantially similar contract of employment if they had
been dealing with each other at arm's length. According to the
Federal Court of Appeal in Canada v. Jencan,
[1997] F.C.J. No. 876, [1998] 1 F.C. 187, the
Appellant must establish that the Minister acted in bad faith or for an
improper purpose or motive, that he failed to take into account all of the
relevant circumstances, as expressly required by paragraph 3(2)(c)(ii)
of the UIA and paragraph 5(3)(b) of the EIA, or that he took into
account an irrelevant factor.
[54] In Légaré v. M.N.R., [1999] F.C.J. No. 878, the
Federal Court of Appeal summarized the role of the Minister and that
of the Court. Marceau J., summed it up as follows at paragraph 4:
The Act requires the Minister to make a
determination based on his own conviction drawn from a review of the
file. The wording used introduces a form of subjective element, and while
this has been called a discretionary power of the Minister, this
characterization should not obscure the fact that the exercise of this power
must clearly be completely and exclusively based on an objective appreciation
of known or inferred facts. And the Minister's determination is subject to
review. In fact, the Act confers the power of review on the Tax Court
of Canada on the basis of what is discovered in an inquiry carried out in
the presence of all interested parties. The Court is not mandated to make
the same kind of determination as the Minister and thus cannot purely and
simply substitute its assessment for that of the Minister: that falls under the
Minister's so‑called discretionary power. However, the Court must
verify whether the facts inferred or relied on by the Minister are real and
were correctly assessed having regard to the context in which they occurred,
and after doing so, it must decide whether the conclusion with which the
Minister was "satisfied" still seems reasonable.
[55] The question of whether persons have a non‑arm's length
relationship, under the UIA and the EIA, must be determined in accordance with
the Income Tax Act (ITA). Section 251 deals with the
issue of related persons, because related persons do not deal with each other
at arm's length. Under section 251, there is an irrebuttable presumption
that persons connected by marriage or by common‑law partnership are
related persons within the meaning of the ITA. However, this presumption did
not include common‑law spouses prior to 1993, when the ITA was amended to
include them among related persons (subsection 252(4) of the ITA,
applicable after 1992). Therefore, the Respondent cannot use this presumption
for the first period at issue in this case. Thus, he must show that the parties
were, in fact, not dealing with each other at arm's length.
Paragraph 251(1)(c) of the ITA may apply, with the effect that
common‑law spouses are not dealing with each other at arm's length,
insomuch as the evidence submitted proves such.
[56] In François Fournier v. M.N.R.,
91 DTC 743, Dussault J. of this Court appropriately summarized
the concept of a non‑arm's length relationship between unrelated persons
when he said:
When the parties to a transaction
act in concert, when they have similar economic interests or they act with a
common intent, it is generally admitted that they are not dealing at arm's
length.
[57] There is no presumption to the effect that common‑law spouses do
not deal with each other at arm's length. It must be proved that they have
acted in concert with a common economic interest, within the context of the
employment at issue and not within the context of their life together.
[58] In Lapointe v. M.N.R., [1995]
T.C.J. No. 1551, Tremblay J., referred to paragraph 3(2)(c)
of the UIA, stating at paragraph 76 that its purpose "is that we be
satisfied that the contract of employment contains reasonable terms and
conditions, between parties – the employer and employee – with
separate interests." Further on, he writes at paragraph 79 that
"in the context of paragraph 3(2)(c), the parties will be deemed
to be dealing with each other at arm's length and not to have a de facto
non‑arm's length relationship if they have entered into a contract of
employment the terms and conditions of which are similar to those that would
normally be adopted by parties dealing with each other at arm's length."
Obviously, these terms and conditions are those found in a contract of
employment: the nature of the work, the remuneration paid, the terms and
conditions, the duration and the importance of the work performed.
[59] In this case, it must be determined whether there is a de facto
arm's length relationship. Therefore, it is appropriate to consider what
took place outside the period at issue. As such, it is possible to consider the
fact that during the periods prior to 1992, the Appellant's employment was
deemed to be insurable within the meaning of paragraph 3(1)(a) of
the UIA.
[60] Other considerations include the fact that the Appellant and the Payor
have been common‑law spouses since 1980, and they have three children
from this relationship, born in 1985, 1988 and 1991. The Appellant has worked
for the Payor/spouse since 1987. In 1992, she worked for him four hours
per week, with the exception of a twelve‑week period in which she worked
full‑time. The same scenario is repeated the following years, except that
the full‑time work periods have increased over the years.
[61] Undoubtedly, the Appellant performed the work and carried out the
duties she described. Undeniably, she helped the Payor/spouse establish his law
office, provide services to his clients and manage all aspects of the office.
Such support is highly commendable. Furthermore, I agree that a law office such
as this requires weekly work for bookkeeping and maintaining up‑to‑date
accounts. Every year, it is necessary to prepare financial statements and
income tax returns, to issue T4 slips and to evaluate performance. The amount
of time spent completing each of these duties may vary depending on the
employee's skills and the company's business volume.
[62] In this case, considering the evidence at trial, including the size of
the law office, its sales figures, the number of employees and the work
description during the part‑time and full‑time employment periods,
it is difficult to accept the Appellant's claim that she is able to complete
all of her duties within the time allotted during each of these periods. All of
the evidence relating to the amount of time devoted to the duties during the
part‑time work period leads me to determine that it would take more than
four hours per week to complete these duties, especially since the work
was being performed for one hour per day, in the evening after the children
were in bed. Moreover, every year, a period of ten to thirteen weeks is
required to perform the year‑end duties, financial statements, income tax
returns, statistics and other duties that were described; this period seems too
long. In fact, extra duties were added, such as the compilation of invoices in
1992, and the study of thirty‑two financial planning lessons and an
economics book, spread over a three‑year period. However, according to
the claims for unemployment insurance benefits, each work stoppage was due to a
lack of work. Nothing in the evidence suggests that this approach is justified.
[63] The Appellant's salary is another factor to be considered in relation
to the Payor's business and the characteristics of his law office. Undoubtedly,
the Appellant's skills warrant substantial remuneration, which could even
exceed the salary she received from the Payor. However, in the circumstances of
this case, it is important to remember that the Payor needed someone to do his
bookkeeping and accounting and, according to his testimony, it would be less
costly for him to have someone working for him that it would be to hire an
accounting firm. In my opinion, as confirmed in the Appeals Officer's report,
an employee in this field would have cost less than the amount he was paying
the Appellant. On the evidence, it is obvious that less time was required to
complete the accounting duties than the Appellant's hours of work, as she had
time to study and summarize financial planning material.
[64] Should the Payor have invested so much time and money in training
another employee, or could he have hired another employee so that he could
study the financial planning material at issue? In this case, there is no doubt
that all of the time the Appellant spent studying and training was to improve
the law office's performance and their income. I cannot ignore the fact that during
the Appellant's testimony, she referred to her work and to completing her
duties using the word [translation]"we,"
as though she were associated with the Payor.
[65] For these reasons, it is my determination that the Appellant and the
Payor were, in fact, not dealing with each other at arm's length during the
period from June 22 to September 11, 1992. Therefore, this
employment is not insurable within the meaning of the UIA.
[66] With regard to the issue of whether the decisions made under paragraph 3(2)(c)
of the UIA and paragraph 5(2)(l) of the EIA were made in a manner
contrary to law, I shall reproduce paragraph 50 of the decision of
Isaac C.J., in Jencan, supra, which reads as follows:
The Deputy Tax Court Judge,
however, erred in law in concluding that, because some of the assumptions of
fact relied upon by the Minister had been disproved at trial, he was
automatically entitled to review the merits of the determination made by the
Minister. Having found that certain assumptions relied upon by the Minister
were disproved at trial, the Deputy Tax Court Judge should have
then asked whether the remaining facts which were proved at trial were
sufficient in law to support the Minister's determination that the parties
would not have entered into a substantially similar contract of service if they
had been at arm's length. If there is sufficient material to support the
Minister's determination, the Deputy Tax Court Judge is not at
liberty to overrule the Minister merely because one or more of the Minister's
assumptions were disproved at trial and the judge would have come to a
different conclusion on the balance of probabilities. In other words, it is
only where the Minister's determination lacks a reasonable evidentiary
foundation that the Tax Court's intervention is warranted. An assumption
of fact that is disproved at trial may, but does not necessarily, constitute a
defect which renders a determination by the Minister contrary to law. It will
depend on the strength or weakness of the remaining evidence. The
Tax Court must, therefore, go one step further and ask itself whether,
without the assumptions of fact which have been disproved, there is sufficient
evidence remaining to support the determination made by the Minister. If that
question is answered in the affirmative, the inquiry ends. But, if answered in
the negative, the determination is contrary to law, and only then is the
Tax Court justified in engaging in its own assessment of the balance of
probabilities. Hugessen J.A. made this point most recently in Hébert, supra.
At paragraph 5 of his reasons for judgment, he stated:
In every appeal under section 70 the Minister's
findings of fact, or "assumptions", will be set out in detail in the
reply to the Notice of Appeal. If the Tax Court judge, who, unlike the
Minister, is in a privileged position to assess the credibility of the
witnesses she has seen and heard, comes to the conclusion that some or all of
those assumptions of fact were wrong, she will then be required to determine
whether the Minister could legally have concluded as he did on the facts that
have been proven. That is clearly what happened here and we are quite unable to
say that either the judge's findings of fact or the conclusion that the
Minister's determination was not supportable, were wrong.
[67] Thus, it must be determined whether the Minister's decisions were made
in a manner contrary to law, even though some of the assumptions of fact could
be disproved. In particular, I am thinking of the fact that the investigating
officer did not consider the work that the Appellant performed in 1993, 1994
and 1995, outside of her accounting duties, such as studying the Hume program.
Neither the Appellant nor the Payor informed the officer of this fact at the
time. Therefore, it is difficult to criticize him for this oversight; however,
even if he had been informed, I do not believe, based on all of the information
gathered, that this fact could constitute a defect that would render the
Minister's determinations contrary to the Act. In my opinion, there are
sufficient facts to justify his determinations.
[68] The Appellant placed considerable emphasis on the amount of time
required to complete her accounting duties and on the assessment of Jean‑Pierre Gauthier,
CGA. The latter had opportunity to review the books of account, the records and
the financial statements during the audit of the Payor. Therefore, he was able
to express an opinion with regard to the number of hours or days required to
carry out these duties. In addition, the Payor testified that the accountant
had informed him that it would be less costly for him to have an employee at
his office than it would be to hire an accountant. I assume that a discussion
took place at this meeting concerning the amount of time required to carry out
the duties at issue. On both sides, it is my determination that the time varies
depending on the skills and experience of the individual assigned to these
duties. One thing is certain: in this case, the Appellant did not need eleven,
twelve or thirteen weeks to complete these duties during her full‑time
employment period. Moreover, this explains why she had time to complete the
other duties she described in her testimony. In addition, there is no doubt
that it was difficult for her to work her four hours per week part‑time,
one hour each evening, at home after the children were in bed. In my
opinion, none of these issues would have changed the Minister's decision. The
Payor's testimony regarding the Appellant's work left me with the distinct
impression that he did not really know the amount of time the Appellant devoted
to each of her duties. Clearly, her departure was not due to a lack of work.
[69] Based on the evidence submitted by the Appellant concerning the
remuneration she received from the Payor, I cannot conclude that the Minister's
analysis is unreasonable. The Payor testified that the Appellant's salary was
calculated based on the salary she received from the Université Laval and
based on her skills. There is no doubt that the Appellant's skills warrant a
high salary; however, her duties and functions did not warrant the salary she
received. The Respondent submitted evidence that the average hourly rate for an
accounting employee is much lower than that which the Appellant received. The
Appellant was clearly overqualified for this position; however, that does not
justify the remuneration paid in this case. One must also consider that the
value of a service is sometimes determined by what the labour market can
provide for equivalent work.
[70] With regard to the work the Appellant performed that was unrelated to
accounting, namely assisting with the Payor's financial planning studies, one
must question the Payor's financial capacity to have an employee with a non‑arm's
length relationship to study and summarize the financial planning study
programs. Moreover, the Minister took this issue into consideration, and with
good reason, when he analyzed the remuneration paid and the nature and
importance of the work performed.
[71] The Minister's analysis of the terms and conditions of employment
correspond to all of the evidence presented at trial, except for the fact, as I
mentioned previously, that the Appellant had extra duties that she did not
disclose to the officers during their investigation, namely the financial
planning study program. In my opinion, this does not preclude the fact that, on
the totality of the evidence, the Appellant did not need all of the time she
claimed she needed to prepare the financial statements, income tax returns,
analyses and statistics. The Appeals Officer had reason to doubt this, given
the size of the law office and its business volume. In addition, one must
question why neither the Payor nor the Appellant disclosed these extra duties
when they met with the officers.
[72] When the duration of employment corresponds, or nearly corresponds, to
that which is necessary to qualify for employment insurance benefits, it is
completely natural that this should raise questions, particularly in cases that
do not involve seasonal employment. In this case, the Payor practises law year
round, with no periods that are particularly slower than others. The
Appellant's accounting work could not fill her entire work schedule. During the
periods before she was hired as a legal secretary, the Appellant spent her time
redoing invoices for a number of cases, and in subsequent years, she studied
financial planning materials and prepared this service, which the Payor wished
to add to his practice. What is questionable in this case, is that this work,
which continually awaited the Appellant, was postponed year after year, whereas
the records of employment indicated a lack of work as the reason for
separation. The full‑time employment in 1993 and 1994 does not correspond
to the time of year in which she should have had to work to prepare the Payor's
income tax returns. In my opinion, the Appellant should have worked more hours
during some of the periods for which she claimed she worked four hours per
week.
[73] The evidence the Appellant submitted did not contradict the facts upon
which the Minister relied. No explanation was provided that would lead me to
determine that the Minister's analysis with regard to the duration of the
employment was unreasonable. The Payor explained the valuable assistance the
Appellant provided in his work as a financial planner and the way in which she
helped him with his cases. However, he did not explain how he was able to
manage without her during the periods in which she was not at the office. If
the services she provided were required year round, then what explanation is
there for the length of the full‑time and part‑time employment
periods? Clearly, there was no lack of work.
[74] In addition, the Appeals Officer questioned the
nature of the work. In spite of the fact that his findings were made without
any knowledge of the invoicing and study work that the Appellant performed
during the periods from 1992 to 1997 inclusive, this evidence is not sufficient
to support a determination that the final result of the Minister's analysis is
unreasonable. There is sufficient surprising evidence, such as the need to
extend the study of the Hume program over a number of years, work that could
have been completed within a single year, not to mention that a "lack of
work" was used to justify separation. In my opinion, the Minister had
sufficient evidence to justify his determination. The Payor was aware of the
periods during which the Appellant had to work in order to qualify for
benefits. The Minister's determination for the periods specified in
Dockets 96‑2427(UI), 1999‑4382(EI) and 1999‑4386(EI) was
not rendered in a manner contrary to law. The Respondent's officers did not
lack objectivity in the four dockets at issue and during their analysis of
the periods at issue.
[75] The comments the officers made to the Appellant, or those included in
their report, reflect reality rather than a lack of objectivity on their part.
Thus, perception becomes very subjective. Furthermore, I reiterate the reasons
I outlined in my conclusion with regard to the de facto non‑arm's
length relationship for the period in 1992, concerning the terms, conditions,
and other aspects of the contracts of employment at issue.
[76] In Docket 1999‑4391(EI), Counsel for the Appellant raised
the fact that the Appellant occupied three positions during this period.
He argued that the Minister did not have regard for this fact or consider the
salary. The officer's report reveals that the information used in his analysis
came from a letter from the Payor/Counsel for the Appellant, sent to him on
April 19, 1999, explaining the additional work, particularly the
secretarial work. His report describes the changes to the Payor's activities.
Nothing in the evidence heard leads me to determine that the Minister acted in
a manner contrary to law with regard to that period. In fact, based on the
evidence heard, it is clear to me that there is a business complicity between
the Payor and the Appellant, leaving very little room for an employer‑employee
relationship, or even any degree of subordination. I need only refer to the
Appellant's testimony and to her use of the word [translation] "we" in almost all of their
endeavours.
Constitutional
issue
[77] The Appellant argues that paragraph 3(2)(c) of the UIA and
paragraph 5(2)(i) of the EIA contravenes section 15(1) of the Canadian Charter
of Rights and Freedoms, which states:
Every individual is equal before and under the law and
has the right to the equal protection and equal benefit of the law without
discrimination and, in particular, without discrimination based on race,
national or ethnic origin, colour, religion, sex, age or mental or physical
disability.
[78] The Appellant's position on this issue is that she, and any other
individuals not dealing at arm's length with their employer, must be subject to
a different burden, an even higher one, simply because of their marital status,
a burden to which other employment insurance claimants are not subject. This
different burden involves demonstrating to the Minister that it is reasonable
for him to conclude, having regard to all the circumstances of the employment,
including the remuneration paid, the terms and conditions, the duration and the
nature and importance of the work performed, that the contract of employment
would have been substantially similar if they had been dealing with each other
at arm's length. The Appellant argued that these provisions are based on the
assumption of fraud, whereas they should be based on the assumption that
everyone is acting in good faith.
[79] The Appellant testified that she felt very humiliated by the fact that
during one of her meetings with a representative from Human Resources
Development Canada, she was reminded to indicate on her benefit
application form that she worked for her spouse. She was humiliated and hurt by
this comment due to the tone of voice with which the comment was made. In
addition, she felt that the investigating officers were inquisitive because she
worked for her spouse and he was likely representing her free of charge;
furthermore, if this were not the case, she would not have filed an appeal with
our Court.
[80] The Appellant demonstrated the higher unemployment rate in the Gaspé
area and the difficulties that this represents for women choosing to live in
this area. Since the 1993 amendments to the UIA, she has been excluded from
benefits unless she can prove that there is a contract of service that would be
substantially similar if there were an arm's length relationship. The Appellant
made a considerable effort to find a job upon arriving in the Gaspé area, but
she was not successful. The Appellant emphasized the remarks made by
officers Blais and Turgeon, which alluded to the fact that people would
like to work for their spouse for ten to twelve weeks or that she was
fine because she worked for her spouse. She found these comments demeaning, as
she testified that she understood this to mean that she needs unemployment
insurance benefits and that her husband cannot provide for her.
[81] The Respondent called the following witnesses: Wayne Bourbeau,
Acting Chief, Coverage and Premium Policy regarding employment insurance;
René Racette, Senior Manager, Plain Language Project (Employment Insurance Act),
both from Human Resources Development Canada; and
André Le Bourdais, Appeals Officer with the same department.
[82] Mr. Bourbeau presented a systematic summary of the developments
and modifications made to the Canadian unemployment/employment insurance
program since 1970, particularly since 1990, when paragraph 3(2)(c)
of the UIA came into force. He explained the procedure that was established to
identify applications for benefits for which the employment might not be
insurable under these provisions. Thus, three questions were added to the
application forms and a benefit policy circular was distributed on
November 18, 1990. These administrative identification procedures
have been modified and perfected over the years in order to quickly determine
the issue of insurability, reduce the number of cases and only process questionable
cases. As a result of these efforts, only 24% of cases that were deemed to
involve a non‑arm's length relationship were sent to Revenue Canada,
now Canada Customs and Revenue Agency, for determination by the
Minister. Of the 24% of cases sent to the Minister, 61% were deemed to be
insurable and 31% were deemed to be uninsurable.
[83] Mr. René Racette has 29 years of experience in the federal
public service and his responsibilities have always related to the UIA and the
EIA. He and his colleagues have developed benefit entitlement guidelines on
various subjects, including non‑arm's length employment. Through his
years of experience, he has acquired knowledge of the entire history of the UIA
and the EIA. Since 1996, he has held the position of Senior Policy
Advisor, Policy and Legislation Development Directorate at Human Resources
Development Canada. His role consists of developing policies that impact
legislative provisions relative to the benefits to be paid, the insurability of
employment, insurable earnings and the insurable employment weeks credited on
behalf of the Canada Employment Insurance Commission.
[84] In view of the decision of the Federal Court of Appeal
in Canada v. Druken, [1989] 2 F.C. 24, he worked on developing
Bill C‑21, which took into account the government's concerns at the
time, including:
·
Promoting the
reintegration of unemployed persons into the labour market;
·
Making the
unemployment insurance system more equitable and consistent with the Canadian Charter
of Rights and Freedoms while preserving the system's integrity;
·
Preventing an
increase in the deficit.
[85] According to the witness, paragraph 3(2)(c) had two
important objectives:
[translation]
First, it needed to comply with the decision of the
Federal Court of Appeal in Druken under the Canadian Human
Rights Act by not discriminating on the basis of marital status.
Furthermore, it needed to comply with the Canadian Charter of Rights
and Freedoms.
Second, it needed to find a remedy likely to ensure
the integrity of the unemployment insurance system: indeed, workers and
employers who, under Bill C‑21, were required to fully contribute to
the unemployment insurance fund had a right to expect that the government would
use that fund in a manner consistent with the spirit of the system, namely to
insure the risk of involuntary and temporary loss of employment.
[86] According to the witness, both objectives covered under the new
paragraph 3(2)(c), were to ensure that workers were not denied
benefits due to a place with the employer, provided that the circumstances of
the contract of employment with the employer are similar to those of a contract
of employment between parties who are dealing with each other at arm's length.
[87] Witness André Le Bourdais testified with regard to the
number of appeals that were filed with the Tax Court of Canada
from 1991 to 2001, and the percentage of the Court's decisions that vacated or
varied the Minister's decisions in cases involving a non‑arm's length
relationship. From 1995 to 2001, the Court vacated 37% of the decisions. In
addition, he submitted statistics according to the various types of non‑arm's
length relationships specified in the Act and he noted that there were
fewer appeal cases. He explained that there was no relationship between a
determination of insurability made by an officer from Human Resources
Development Canada and one made by an Appeals Officer from
Canada Customs and Revenue Agency.
[88] The Respondent's position is that this entire analytical process
provides flexibility in assessing cases involving a non‑arm's length
relationship and that there is a gradual decline in the number of cases
referred back to the Minister. Counsel for the Respondent maintained that the
process by which to determine the insurability of employment is the same,
regardless of whether or not the case involves a non‑arm's length
relationship, in the sense that Appeals Officers must gather the facts,
analyze them objectively and render a decision. In cases involving a non‑arm's
length relationship, they must objectively analyze the conditions of
employment. Related persons do not have a heavier burden, although it includes
an additional component. The additional burden and the nature of the process do
not undermine human dignity.
[89] In addition, Counsel for the Respondent raised the principle of res judicata
with regard to the constitutional issue concerning Docket 96‑2427(UI),
where the Federal Court of Appeal referred the case back to our Court
for a new trial. She argued that this Court is simply ordered to rehear the
appeal on the issue of employment insurability, not on the constitutional
issue.
[90] In this case, the Federal Court of Appeal judgment disposed
of the constitutional issue covered under paragraph 3(2)(c) of the
UIA. In my opinion, this conclusion also applies to paragraph 5(3)(b)
of the EIA. I shall quote the passage that, in my opinion, summarizes the
matter at issue and its disposition.
It can readily be seen that, in this
s. 3(2)(c)(ii) describing the procedure to be followed in arriving
at the conclusion that a contract between related persons was not unduly
influenced by their relationship (and so is covered), Parliament applied
essentially the approach adopted by the courts in concluding that unrelated
persons were in fact not acting at arm's length in concluding a particular
contract (which accordingly should be excepted). This finding,
Judge Archambault maintained in his decision in Thivierge, suffices
to protect the provision from any constitutional challenge based on s. 15
of the Charter as "It is . . . the terms and
conditions of a given employment [whether between related persons or not] which
determine the eligibility of an employment, not the personal characteristics of
the employee". He summed up his thinking clearly in a passage quoted and
adopted by the trial judge:
A reading of paragraph 3(2)(c) of the Act
as a whole leads me to conclude that the exception of employment is not made on
the basis of a personal characteristic, whether it be sex, marital status or
family status, but rather on the basis of the very terms and conditions of the
contract of employment. If the terms and conditions of the contract of
employment are those that persons dealing at arm's length would have accepted,
the employment constitutes insurable employment, whether the employee be female
or the wife of the person who controls the employer. It is the terms and
conditions of the contract of employment that determine whether there is
insurable employment. Since there is no inequality based on personal
characteristics, subsection 15(1) of the Charter cannot be argued
in respect of paragraph 3(2)(c) of the Act.
It seems to me, with respect, that these
comments, proper though they may be, do not affect the constitutional argument.
The inequality mentioned as a reason for unconstitutionality does not arise
from the exception or final acceptance of the employment, which it is true is
determined in all cases by the terms of the contract of employment. The
inequality complained of arises from the process adopted in deciding on the
exception or acceptance. In one case, review is required in all circumstances
and must be made on the basis of a presumption that the employment is excepted,
which implies that doubt will count against the claimant, while in the other,
the review is highly exceptional and the presumption works in the opposite
direction, which means that any doubt is resolved entirely in the claimant's
favour.
The real response to the constitutional
challenge is that none of the conditions for application of s. 15 of the Charter
as laid down by the Supreme Court, especially in its leading decision in Law v. Canada (M.E.I.),
is present in the case at bar. The differential treatment in the procedure is
not based on a personal characteristic of the claimants in question, it does
not limit access by anyone to the benefits of the Act since any contract
regarded as genuine will be covered, and finally the dignity of the individual
is not affected.
The distinction is made between related and
unrelated persons, related persons being physical or artificial persons
associated with each other by some existential link resulting: in the case of
physical persons, from consanguinity, adoption or legal or (since 1993) de facto
marriage; in the case of artificial persons, from the relationship between
their controlling bodies. It seems to me that what is considered is a factual
relationship, not some personal or individual characteristic of the persons
involved. Related persons within the meaning of the Act clearly do not
form a special group of individuals united by some common feature, still less a
traditionally disadvantaged group. Moreover, the differential treatment exists
only in procedural terms, it is made necessary by the need to ensure that the contract
is genuine and it should not normally result in any substantive detriment.
Finally, legislation seeking to ensure that the employer‑employee
relationship between two individuals has remained separate and apart from
the relationship already existing between those individuals could not be
regarded as demeaning their human dignity.
The constitutional challenge, in my view
resulting solely from what might roughly speaking be called a requirement of
caution in accepting as genuine and proper a contract of employment concluded
between two already related persons, cannot stand. If the wording could be
interpreted as giving the Minister a purely discretionary authority to accept
or disallow the contract, and it appears to have been understood that way by some
people, the constitutional challenge might perhaps be more forcefully
maintained. However, that is not the case, and this observation leads me to the
second aspect of the application.
[91] In this case, the Federal Court of Appeal considered the
conditions for applying section 15 of the Charter, as identified by
the Supreme Court of Canada in Law v. Canada,
[1999] 1 S.C.R. 497, and determined that none existed.
Therefore, in this case, it is not necessary for me to repeat the exercise
carried out by the Federal Court of Appeal. The evidence submitted by
the Appellant mainly concerned the employment difficulties faced by women in
the Gaspé Peninsula compared to the rest of Canada, which I do not believe
is a factor included in the comparative method found in Law. The
unemployment rate in the Gaspé Peninsula does not render
paragraph 3(2)(c) unconstitutional, nor do the Appellant’s feelings
that she was prejudged when she was reminded to check the box indicating that
that she was employed by her spouse, or her inability to work in her field.
These are all subjective factors, which, in my opinion, cannot be considered in
the analysis required by Law. In this case, no condition for the
application of section 15 of the Charter exists. I reiterate the
passage in the Federal Court of Appeal case. The
differential treatment in the procedure is not based on a personal
characteristic of the claimants in question, it does not limit access by anyone
to the benefits of the Act since any contract deemed to be genuine will
be covered, and finally the dignity of the individual is not affected.
[92] The additional evidence submitted by the Appellant in all of the
dockets is clearly insufficient to support a conclusion that differs from that
of the Federal Court of Appeal. The answers to the three main
questions that I must consider are the same. For these reasons, the
constitutional argument is dismissed. Therefore, I do not need to address the
issue of the principle of res judicata.
[93] In conclusion, I am not able to vary the decisions of the Minister for
the periods at issue. These decisions are confirmed. Thus, the appeals are
dismissed.
Signed at Ottawa, Canada, this 9th day of
May 2003.
J.T.C.C.
on this 13th
day of May 2004.
Sharlene Cooper, Translator
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