[OFFICIAL ENGLISH
TRANSLATION]
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Reference: 2004TCC416
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Date: 20040625
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Files: 2003-744(EI)
2003-745(EI)
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BETWEEN:
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LÉOPOLD ROY,
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Appellant,
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And
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THE MINISTER OF NATIONAL REVENUE,
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Respondent.
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REASONS FOR JUDGMENT
Tardif J.
[1] These are two appeals from a
determination with respect to the insurability of work done by the appellant.
First, the work at issue was carried out during the period from April 3 to July
7, 2000, on behalf of and for Mr. Steeve Roy, the appellant’s son.
[2] Second,
from February 28 to June 29, 2001, the work was carried out for Ms. Élizabeth Awashish Roy, the appellant’s wife.
[3] The
two determinations had been communicated by letter on November 29, 2002. The
legal basis of the two determinations was that the work done by the appellant
stemmed from a non-arm’s-length relationship between the payer and his father
in one case and the payer and her husband in the other.
[4] Alternatively,
the respondent also argued that the work done had not been in connection with a
true contract of service since the work had not been subject to any power of
control.
[5] The
parties agreed to proceed on evidence common to both appeals. After the court
had explained to the appellant the procedure and certain requirements,
including the requirement related to the burden of proof, the appellant told
the court that he was prepared to make some admissions regarding the assumed
facts in support of the determinations.
[6] The
assumed facts taken into consideration in support of the two determinations
were as follows:
File 2003-744(EI):
a) Since
November 1999, the payer has been operating a transport business under the
corporate name “Transport J.S.S. Sikum Enr.”
b) The payer,
the appellant’s son, is the sole owner of the transport business.
c) The payer
specializes in transporting wood chips and roundwood.
d) The payer
operates his business year-round.
e) The payer has
monthly sales varying between $26,000 and $28,000.
f) The payer’s
commercial office is located in Mr. Steeve Roy’s personal residence.
g) The payer
owns two trucks; one is used to transport chips, and the other is used to
transport logs.
h) The trucks
run 24 hours a day, Monday to Friday.
i) The payer
hires four drivers full time as well as the appellant as a substitute driver.
j) The payer
maintained that the appellant’s hours of work varied greatly and depended on
the absences of the regular drivers.
k) The payer
could consult the appellant’s hours of work by consulting the logbook of the
truck used by the appellant.
l) The
appellant replaced drivers who were ill, on vacation, or unavailable.
m) The appellant
had a Class 1 driver’s licence, and he was registered as a driver for the payer
in most of the unloading locations, whereas the other drivers had to obtain authorization
from the payer for certain unloading locations.
n) The appellant
received earnings based on the trips he made; he could receive between
$125 and $150 for each trip he made.
o) It was
impossible to reconcile the information on the trips made by the appellant and
the information contained in the payer’s record of wages.
p) In addition
to working as a driver, the appellant took care of the payer’s bookkeeping and
accounting.
q) The
appellant’s wife, Ms. Élizabeth Awashish, also operated a transport business in
the same field as the business of the payer (her son).
r) The
commercial office of the business of the appellant’s wife was also located in
the payer’s residence.
s) The appellant
also took care of the bookkeeping and accounting for his wife’s business.
t) The
appellant claimed that he devoted two to three hours per week to the accounting
for each business; he also devoted a few hours to each business at the end of
every month to make payments and complete the documents needed for the various
governments.
u) The appellant
did not receive any earnings from the payer or from his wife for the hours
spent doing the accounting for their businesses.
v) During the
period at issue, the appellant had been entered in the payer’s record of wages
for 13 consecutive weeks.
w) During that
period, the appellant had allegedly made four to six trips per week.
x) The appellant
had allegedly not made any other trips for the payer as a driver outside of the
period at issue, whereas in fact he had had to replace the other drivers when
they were absent.
y) The appellant
had performed a number of services for the payer as a driver and as an
accounting bookkeeper outside of the period at issue without being registered
in the record of wages.
z) The period of
work claimed by the appellant did not correspond to the business’s needs or to
the period actually worked by the appellant; it corresponded to the appellant’s
needs so that he could receive employment insurance benefits.
File 2003-745(EI):
a) Since July 2000,
the payer, Ms. Roy, has operated a transport business under the corporate name
“Transport Nipin Enr.”
b)
The
payer, the appellant’s wife, is the sole owner of the transport
business.
c) The payer
specializes in transporting wood chips and sawdust.
d) The payer
operates her business year-round.
e) The payer has
monthly sales varying between $48,000 and $50,000.
f) The payer’s
commercial office is located in the personal residence of Mr. Steeve Roy, her
son.
g) The payer
owns two trucks.
h) The trucks
run 24 hours a day, Monday to Friday.
i) The payer
hires four drivers full time as well as the appellant as a substitute driver.
j) The payer
maintained that the appellant’s hours of work varied greatly and depended on
the absences of the regular drivers.
k) The payer
could consult the appellant’s hours of work by consulting the logbook of the
truck used by the appellant.
l) The
appellant had to replace drivers who were ill, on vacation, or unavailable.
m) The appellant
had a Class 1 driver’s licence, and he was registered as a driver for the payer
in most of the unloading locations, whereas the other drivers had to obtain
authorization from the payer for certain unloading locations.
n) In addition
to working as a driver, the appellant took care of the payer’s bookkeeping and
accounting.
o) Mr. Steeve
Roy, the son of the appellant and the payer, also operated a transport business
in the same field as the payer’s business.
p) The
commercial office of the appellant’s son’s business was also located in Steeve
Roy’s residence.
q) The appellant
also took care of the bookkeeping and accounting for his wife’s business.
r) The
appellant claimed that he devoted two to three hours per week to the accounting
for each business; he also devoted a few hours to each business at the end of
every month to make payments and complete the documents needed for the various
governments.
s) The appellant
did not receive any earnings from the payer or his wife for the hours spent
doing the accounting for their businesses.
t) During the
period at issue, the appellant had been entered in the payer’s record of wages
for 17 consecutive weeks.
u)
The
appellant had allegedly not made any other trips for the payer outside of the
period at issue, whereas in fact he had had to replace the other drivers when
they were absent.
v)
During
that same period, the appellant had received fixed earnings of $640 per week.
w) The appellant
allegedly received earnings of $16 per hour, whereas the other drivers received
a fixed amount per trip.
x)
During
the period at issue, the appellant had allegedly worked 40 hours each week,
whereas he was supposed to replace drivers based on the payer’s needs.
y)
The
appellant managed the business and looked after its daily tasks.
z) The
appellant performed a number of services for the payer outside of the period at
issue without being registered in the record of wages.
aa)
The
period of work claimed by the appellant did not correspond to the business’s
needs or to the period actually worked by the appellant; it corresponded to the
appellant’s needs so that he could receive employment insurance benefits.
[7] With
regard to file 2003-744(EI), the appellant admitted all of the subparagraphs
except subparagraphs m), o), x), and z).
[8] With
regard to file 2003-745(EI), the appellant admitted all of the subparagraphs
except subparagraphs m), x), and aa).
[9] Although
the two payers testified very succinctly, the evidence consisted essentially of
the appellant’s testimony. Gifted with a strong personality and articulateness,
the appellant showed that he had expertise and experience in the economic
sector in which his son and his wife worked; he also had good managerial
qualities.
[10] However, the payers, the appellant’s son and wife, showed some
discomfort and, in the wife’s case, a total lack of experience; therefore,
during the periods at issue, the appellant had been an indispensable person.
[11] The Minister of National Revenue had conducted a very exhaustive
analysis, taking into consideration all of the relevant facts. Also, the number
of facts that were assumed and repeated in both responses to the notices of
appeal were more than sufficient to support and justify the determinations
being appealed. After the appellant had acknowledged the majority of these
facts, a number of which were deciding factors, to be accurate and true, the
appeals could be dismissed on this one basis alone; however, I will add some
comments and observations.
[12] Mr. Léopold Roy explained that he had been very deeply affected by a
tragedy that had occurred in his immediate family. He explained that one of the
methods he had used to forget had been to completely immerse himself in work to
take his mind off of things.
[13] He acknowledged that he had worked outside of the periods at issue for
both businesses. He also affirmed that the wages he had received had been less
than he had deserved, since he had often received earnings based on 40 hours of
work when in reality he had worked more than 70 hours per week.
[14] He said that, on a few occasions, he had slowed down somewhat because
of his state of health. He also maintained that he had voluntarily left work at
the end of each of the periods at issue but had continued at a pace that was
less intense.
[15] He also said that his son had been doing him a favour by allowing him
to accompany him because no one else would have given him that type of
opportunity.
[16] He said that he had been raised in a large family where everyone
helped each other out; this is how he justified the magnitude of the free
services he provided to his son and his wife.
[17] The evidence also revealed that he had acted as a resource person when
his son’s business had been created by training him and giving him all of the
instructions needed to start his business properly.
[18] For his wife’s business, the appellant had not only acted as a
resource person; he had actually done everything, since his wife was clearly
not qualified for those types of activities or interested in them since she was
the owner/operator of another business, a drop-in centre for seniors.
[19] The assumed facts that were mentioned in the notice of appeal and
admitted and the explanations presented during the hearing were coherent; they
fully justify the reasonableness of the two determinations that were behind the
appeals.
[20] There is no doubt that the work performed by the appellant was useful,
necessary, and even essential for the two businesses. However, it seemed just
as apparent that a third party would never have accepted or been offered
substantially similar or comparable employment conditions. A third party would
have been much more demanding regarding salary; on the other hand, a third
party would never have been so generous with his employer. Only the
non-arm’s-length relationship could explain and justify such disinterestedness
and lack of concern about his time.
[21] The appellant himself gave a very good example of the distinctive
nature of his work. He explained that he had to work as a driver to replace a
driver who did not like the spring thaw. Does this fact not show that a third
party with an arm’s length relationship with the payer could have stipulations
that a family member of the employer would not dare express or show?
[22] The appellant also pointed out that his salary should have been
approximately $1,000 per week instead of the $640 he had received.
[23] The balance of evidence showed that the work carried out by the
appellant on behalf of and for his son and wife was not similar to the work a
third party would have done in a comparable context.
[24] In fact, the appellant worked with the same energy, determination, and
concerns he would have had if he himself were the owner of the businesses at
issue, which in itself is not a flaw or something to be criticized; on the
contrary, this enthusiasm and his immense generosity with his time do him
credit. Nevertheless, this type of working relationship does not correspond to
the standards or habits of an employment contract between third parties, where
the content and context of the employment contract are essentially based on
economic concerns. The employee performs specific work in return for
compensation that corresponds to the quality and quantity of work done.
[25] This is also related to the analysis of the alternative argument
raised by the respondent, namely that the appellant did not have insurable
employment within the meaning of the Employment Insurance Act during the
period at issue because, during that period, the appellant and the payer had
not been bound by a true contract of service within the meaning of paragraph
5(1)(a) of the Act.
[26] This argument is fully justified in the case where the payer is the
appellant’s wife. In that case, the appellant himself described himself as a
resource person; in addition, where all of the stakeholders were concerned, he
was the only person qualified to answer all of the questions related to the
affairs of the transport business.
[27] The testimony of the appellant’s wife also confirmed that she did not
have the experience, competency, or authority needed to claim that she had
power of control over the appellant’s activities and actions.
[28] The appellant had acted as though he were the actual owner of the
business. This issue was barely touched on in this case, but the evidence did
not enable me to conclude that Ms. Élizabeth Awashish had acted simply as a
nominee.
[29] Yet there is no doubt that the appellant had never been in a position
of subordination; on the contrary, he had been in a position of authority at
all times during the periods at issue.
[30] As he was more qualified than his son and wife for the work required
for income-generating activities, the appellant had had such an influence on
his son and wife that they had clearly been unable to have any power of
control.
[31] A true contract of service, the only contract that can be determined
to be insurable, must be the result of an agreement according to which specific
work will be carried out in return for adequate compensation, that is, in accordance
with the standards applicable to the economic sector at issue.
[32] That type of employment contract must be justified by economic
concerns in a context where quality, productivity, and efficiency are
omnipresent objectives. The beginning and end of the work must stem only from
the business’s needs.
[33] The quality of working relationships may vary from one business to the
next. In some cases, there may be greater flexibility, more co-operation,
better communication, more generous behaviour, etc., all within a true
insurable contract of service.
[34] However, in some cases there is a very fine line that cannot be
crossed without losing the insurable quality of an employment. This line is
obviously easier to cross when the worker and the payer are not at arm’s
length.
[35] This line may be crossed without bad faith or fraud; this may stem
from simple feelings that are more widespread or omnipresent in the family
environment than in an environment where the person is concerned about and
guided by only economic interests and where balance is generally found
somewhere between the position of the payer, who wants to get as much as
possible for the salary he is paying, and the position of the worker, who wants
the best salary possible for the least amount of work possible within the
simple context of the capitalist system.
[36] In this case, the appellant provided very good, useful, indeed
essential services in consideration for inadequate earnings in that his
earnings did not correspond to what should have been paid to a third party for
the same quality and quantity of work. On the other hand, the appellant had a
strong desire to see his son’s business be successful, which is to his credit
and is explained by his status as a father for whom his son’s well-being has
priority over anything else.
[37] Regarding the transport business operated by the appellant’s wife, it
is not obvious from the evidence that it was actually the wife’s business. It
is certainly not exaggerated to conclude that the business was in fact
controlled and directed by the appellant himself.
[38] In this context, there could not be a true contract of service because
there was no relationship of subordination; indeed, the balance of evidence
never showed that, during the periods at issue, the employers had been in
positions of authority or had made use of any power of control. The appellant
was fully responsible for all of the activities and actions done within the
framework of the work carried out.
[39] For all of these reasons, the appeals are dismissed.
Signed at Ottawa,
Canada, this 25th day of June 2004.
Tardif
J.
Certified
true translation
Colette Beaulne
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