Date: 20001124
Dockets: 2000-1538-EI, 2000-1540-CPP
BETWEEN:
MCCRIMMON HOLDINGS LTD.
32155 MANITOBA LTD., A PARTNERSHIP
o/a BRANDON WHEAT KINGS,
Appellant,
and
THE MINISTER OF NATIONAL REVENUE,
Respondent,
and
DARYL STOCKHAM,
Intervenor.
Reasons for Judgment
Rowe, D.J.T.C.C.
[1]
The style of cause utilized in the Notice of Appeal and
subsequent pleadings or notices named Kelly McCrimmon and Robert
Cornell o/a The Brandon Wheat Kings as the appellant. Counsel for
the appellant advised the proper style of cause should reflect
the corporate members of the partnership, McCrimmon Holdings Ltd.
and 32155 Manitoba Ltd. used by McCrimmon and Cornell to carry on
the business of operating - in Brandon, Manitoba - the hockey
team known as the Brandon Wheat Kings and I ordered the style of
cause to be amended accordingly. Counsel for the appellant waived
the effect of any irregularities arising from the manner in which
the assessment was issued and noted the proper account number had
been used so there was no doubt concerning the matter at issue.
The position of the appellant is that the junior hockey players
on the Wheat Kings team were participants in an established
training program having a sophisticated infrastructure and the
overriding component was educational in nature.
[2]
The appellant partnership, referred to herein as the "Wheat
Kings" appealed from decisions of the Minister of National
Revenue (the "Minister"), dated January 17, 2000
wherein it was decided to confirm certain assessments issued
pursuant to the Employment Insurance Act, Unemployment
Insurance Act and the Canada Pension Plan on the basis
named persons listed on Schedule A attached to the said decision
letter were employed under contracts of service with the
Wheat Kings and were therefore engaged in both insurable and
pensionable employment. The appellant appeals from these
decisions and both counsel agreed that appeal 2000-1540(CPP)
would follow the result in the within appeal.
[3]
Kelly McCrimmon testified he resides in Brandon, Manitoba and for
the past 12 years has been the General Manager of the Brandon
Wheat Kings hockey club. Through his corporation, McCrimmon
Holdings Ltd., he owns 1/3 of the team and Robert Cornell -
through the numbered company - owns the balance and they operate
as a partnership. McCrimmon explained the Canadian Hockey League
(CHL) is composed of the Ontario Hockey League (OHL), Western
Hockey League (WHL) and Quebec Major Hockey League (QMHL). There
are 18 teams - including the Wheat Kings - in the WHL and 55
teams within the CHL. The teams are made up of players who have
been developed in the minor hockey systems. McCrimmon stated that
if a young (aged 16-20) player wishes to play in the WHL, it will
probably be necessary for him to move away from home to the
municipality where the team is situated. The Canadian Hockey
Association (CHA) is an umbrella organization which oversees
Canadian amateur hockey. The CHL has some teams operating in the
United States and they have a similar arrangement with the U.S.
counterpart organization. The WHL - an 18-member league -
includes 7 community-owned teams that are managed by an
Executive Committee and the other 11 franchises are privately
owned. The WHL has a 72-game schedule with training camp
beginning in August. The regular season is finished at the end of
March while the playoff series - including the final - are
concluded on Victoria Day in May. The WHL is run by a
Commissioner and Board of Governors composed of one member from
each team in the league. Approximately 8 meetings are held each
year, on average, and a 5-man Executive Committee is responsible
throughout the year for developing policy, rules, by-laws and
otherwise dealing with matters pursuant to the league
constitution. An excerpt of the Rules and Regulations governing
the WHL was filed as Exhibit A-1 and contains details concerning
the mandatory pay schedule of players while playing for any team
in the WHL. McCrimmon stated the modest amounts paid to the
players have not changed substantially since he played in the WHL
20 years ago except that a second-year player now earns $20.00
more per month than he would have two decades ago. McCrimmon
stated the following monthly payments of $160.00 to a first-year
player, $180.00 to a second-year player, $200.00 to a third-year
player, $240.00 to a fourth-year player and a maximum of $600.00
to a returning 20-year old player are little more than an
allowance to cover their day-to-day needs for transportation and
other small expenses one would normally associate with
"pocket money" if they were living at home. The players
are billeted at local families in Brandon and the host billets
are paid the sum of $270.00 per month together with tickets to
Wheat Kings home games as compensation for a player's room
and board. Since most billets are avid hockey fans, the players
are treated like a member of the billet's family. During the
many years the Wheat Kings have been in the WHL, there has never
been more than two players on the team from Brandon and some
years there are none. In the event the players are local, they
merely reside in their own family homes. McCrimmon referred to
the standard players contract - Exhibit A-2 - which,
in his opinion, did not legally bind a player but served to
formalize the arrangement and sets forth the obligations of the
player and the hockey team. A player can move up to a team
playing in a higher league or to a team in a lower rung in the
hockey hierarchy but cannot voluntarily decide to move to another
team within the WHL. McCrimmon explained the cities having teams
in the WHL range in size from Seattle and Portland to Swift
Current and Prince George so it is vital for the existence
of the league to stabilize the player pool. Pursuant to clause 13
of the contract - Exhibit A-2 - a player can play for a chosen
professional team as an under-age 19-year old player provided the
team in the professional league compensates his former WHL team
by paying the sum of $100,000. The rules of the WHL permit three
20-year olds on the roster of each team and they are referred to
as "over-age" players. As a result, most players remain
in the WHL for only four years. The National Hockey League (NHL)
rules permit an 18-year old to play in that elite league but not
in any minor league or farm system owned by or associated with
that NHL team. McCrimmon stated the WHL has a policy regarding
education of the players. The league will pay the cost of one
year's tuition and books at any Canadian university for each
year a player has performed for a team and every education
agreement is registered with the league Head Office. In any
player-trade agreement, there is a provision relating to an
allocation of the education entitlement as agreed upon by both
teams and this arrangement must be approved by the Governor of
the WHL. The minimum age at which a player can be a member of a
WHL team is 16. The league has a system whereby promising 15-year
olds are contacted and counselled in order to prepare them for
leaving home the next year in order to play with a WHL team in
another city. While playing for the Wheat Kings, all players
attend the same high school and meet with the same counsellor.
All players are subject to a curfew and are closely monitored
both in and out of school, especially as it concerns their
attendance, and the club will mete out discipline. There is a
great deal of travel involved during the course of a hockey
season and the players are required to be at school in Brandon at
9:00 a.m. even if they had just returned - at 5:00 a.m. - from a
road trip. Brandon University and Assiniboine Community College
are both located in Brandon. Those players who finished high
school but have not chosen to attend college or university must
come to training sessions 6 days a week from 12:30 p.m. to 5:30
p.m. each day. On a day on which a game is played, the players
report to the arena between 12:30 p.m. and 2:00 p.m. and then
return to the rink at 5:30 p.m. and remain there until the game
is finished which is usually after 11:00 p.m. Even during a
week when there is no game played, a Wheat Kings player would be
at the arena 24 hours a week. When travelling to play games in
other cities, the bus is the only form of transportation used by
the team and it takes 27 hours to travel from Brandon to
Portland, Oregon and 22 hours to Prince George, British
Columbia. The arduous bus trips are an integral part of the
process by which a player - against long odds - ultimately is
afforded an opportunity to become a professional in the NHL and
to participate in an industry which can permit a young man to
earn up to several million dollars US per year or to play in
other hockey leagues in North America or in Europe where salaries
- for a short season - range up to $100,000 CND. McCrimmon stated
that following his hockey career in the WHL as a Brandon Wheat
King, which he acknowledged was a disciplined environment
requiring many sacrifices, he attended Brandon University.
He is aware of other former players who have become executives,
scouts or therapists and thereby able to remain involved in the
game of hockey as a business. The Wheat Kings players are
permitted one 2:00 a.m. weekend curfew each month. They are
required to work with children at elementary schools and in
programs concerning minor hockey, handicapped children, and drug
awareness as well as interacting with the Brandon business
community. Behaviour is monitored by the team management and the
families acting as billets. The city of Brandon - with a
population of 50,000 - is very proud of the Wheat Kings hockey
team and players have a high profile within the community. At the
annual awards banquet, there is an award for scholastic
achievement and an award for the top graduating player which
includes many facets of the individual as a member of the team
and as a resident of the community of Brandon. The actual team
roster has 22 or 23 players but an additional four persons
can be on a protected list recognized by the WHL and could be
playing somewhere else at a lower level such as Tier II or Midget
Triple A.
[4]
In cross-examination, Kelly McCrimmon stated in the event a
player chooses not to pursue post-secondary education, the room
and board allowance is still paid on his behalf. Pursuant to
clause 12 of the standard player's contract - Exhibit A-2 -
there is provision for the suspension of payment of salary during
a suspension issued by the league to a player but in 12 years
with the Wheat Kings as General Manager, he had never seen this
clause utilized. The fines that can be imposed pursuant to clause
6 of the contract are deducted from the monthly allowance but are
later refunded in the sense the amounts collected are contributed
towards a team function for the benefit of all the players.
[5]
Lyn Shannon testified she lives in Brandon and for the past 10
years has worked as the Executive Assistant to the General
Manager of the Wheat Kings. Her function originally was to reduce
the workload of the General Manager but it developed into other
areas so that she is now responsible for certain accounting,
marketing and administrative functions as well as acting as a
counsellor to the players. She is responsible for issuing them
their monthly cheques. In September, 1992 she enquired of the
previous operator of the hockey club and of Revenue Canada about
the method of payment to the players and was advised that cash
could be paid in a pay envelope - without any deductions - but a
T4 slip would have to be issued to each player at the end of the
year. She advised that since January, 1999, the appellant takes
the appropriate deductions from the cheques issued to the
players. While the billets are compensated at the rate of $260.00
per month, in Shannon's opinion that does not cover the cost
of having a young hockey player living in the home and eating as
a member of the family. The billets enter into an agreement -
Exhibit A-4 - with the Wheat Kings which sets out various terms
and conditions including certain rules and expectations of the
club together with some advice as to how players should be
treated in an attempt to include them into a family atmosphere.
When the players are on the road for 36 games per season, all
costs are paid for by the Wheat Kings. At least 50% of the team -
aged 16-18 - will be in highschool and the older ones can attend
university or the community college and will be reimbursed for
the cost of their books and tuition provided they achieve a
passing grade. At the arena - Keystone Centre - in Brandon there
is space available for the players who are students to study and,
on occasion, the Wheat Kings organization will retain and
pay for a tutor to instruct one or more players.
[6]
Counsel for the respondent did not cross-examine.
[7]
Counsel for the appellant submitted the case did not involve the
usual analysis employed pursuant to the decision of the Federal
Court of Appeal in Wiebe Door Services Ltd. v. M.N.R.
[1986] 2 C.T.C. 200 as it was clear on the evidence the players
were not independent contractors but would be regarded as
employees, without more. However, counsel put forth the
proposition that the true characterization of the status of the
players in relation to the Wheat Kings hockey club was not that
of apprentices but was more consistent with a form of private
education in that the students were participating in a hockey
program offering scholarships containing certain pre-conditions,
one of which was to possess the ability to play hockey at a level
permitting one to be a member of a team in the WHL. The players -
like any students - had to abide by a code of conduct and to meet
certain defined standards similar to any student on a
scholarship. Counsel pointed out that in the long history of the
WHL no assessments for unemployment - or employment - insurance
premiums or contributions for Canada Pension had ever been issued
and it did not seem reasonable within the overall context of the
WHL to regard the small payment to the players as anything more
than an allowance they could spend at their unfettered discretion
that - although it consituted income under the Income Tax
Act - was not insurable income for purposes of the
Employment Insurance Act. In counsel's view of the
legislation, it was intended to protect against involuntary
idleness and is not - from any practical standpoint - relevant to
the situation in the within appeal.
[8]
Counsel for the respondent submitted the evidence clearly
established the relationship of the players to the appellant was
that of employees to an employer as they were engaged in
employment pursuant to a contract of service pursuant to the
Employment Insurance Act and the Regulations
thereunder made it clear the remuneration paid to the players was
to be regarded as insurable earnings. Further, counsel submitted
it would require a specific regulation in order to exempt the
players from the category of insurable employees as otherwise
defined by the Employment Insurance Act.
[9]
Insurable employment is defined in paragraph 5(1)(a) of
the Employment Insurance Act as follows:
"Subject to subsection (2), insurable employment is
(a) employment in Canada by one or more employers,
under any express or implied contract of service or
apprenticeship, written or oral, whether the earnings of the
employed person are received from the employer or some other
person and whether the earnings are calculated by time or by the
piece, or partly by time and partly by the piece, or
otherwise;"
[10]
Subsection 5(2) of the Employment Insurance Act reads as
follows:
"(2)
Insurable employment does not include:
(a)
employment of a casual nature other than for the purpose of the
employer's trade or business;
(b)
the employment of a person by a corporation if the person
controls more than 40% of the voting shares of the
corporation;
(c)
employment in Canada by Her Majesty in right of a province;
(d)
employment in Canada by the government of a country other than
Canada or of any political subdivision of the other country;
(e)
employment in Canada by an international organization;
(f)
employment in Canada under an exchange program if the employment
is not remunerated by an employer that is resident in Canada;
(g)
employment that constitutes an exchange of work or services;
(h)
employment excluded by regulations made under sub-section
(6); and
(i)
employment if the employer and employee are not dealing with each
other at arm's length."
[11] Since the
Employment Insurance Act did not come into force until
June 30, 1996 - and the assessments included the entire year 1996
- it is worth noting the definition of insurable employment
contained in paragraph 3(1)(a) of the Unemployment
Insurance Act is exactly the same as the one above
quoted.
[12] The
definition of insurable earnings contained in subsection 3(1) of
the Insurable Earnings and Collection of Premiums
Regulations reads as follows:
"For the purposes of subsections (1) and (2),
"earnings" does not include
(a) the value of board, lodging and all other benefits
received or enjoyed by a person in a pay period in respect of the
employment if no cash remuneration is paid to the person by the
person's employer in respect of the pay period;
(a.1) any amount excluded as income under
paragraph 6(1)(a) or (b) or subsection 6(6) or
(16) of the Income Tax Act;
(b) a retiring allowance;
(c) a supplement paid to a person by the person's
employer to increase worker's compensation paid to the person
by a provincial authority;
(d) a supplement paid to a person by the person's
employer to increase a wage loss indemnity payment made to the
person by a party other than the employer under a wage loss
indemnity plan;
(e) a supplemental unemployment benefit payment made
under a supplemental unemployment benefit plan as described in
subsection 37(2) of the Employment Insurance
Regulations; and
(f) a payment made to a person by the person's
employer to cover the waiting period referred to in section 13 of
the Act or to increase the pregnancy or parental benefit payable
to the person under section 22 or 23 of the Act if the
payment meets the criteria set out in section 38 of the
Employment Insurance Regulations."
[13] The
relevant provision in the former Unemployment Insurance
(Collection of Premiums) Regulations is section 3:
"3(1) For the purposes of this Part, a person's
earnings from insurable employment means any remuneration,
whether wholly or partly pecuniary, received or enjoyed by him,
paid to him by his employer in respect of insurable
employment..."
[14] Pursuant
to both sets of regulations, the value of board, lodging and
other benefits received in respect of the employment are not
considered as insurable earnings provided no cash remuneration is
paid by the employer to the employee. The Minister recognized
this aspect of the matter when undertaking a variation of earlier
assessments and deleted certain amounts by virtue of certain
players falling into the exempt category.
[15] As noted
by counsel for the appellant, IT 168R3 applies only to
professional athletes employed by football, hockey and similar
clubs and players in the WHL are not included in that
definition.
[16] The
appellant's position is that the players were involved in a
scholarship program. The following definition of scholarship is
contained in The Dictionary of Canadian Law, 2nd Edition,
Carswell, 1995, Dukelow & Nuse:
"1. A sum of money awarded with special regard to the
quality of the academic work of the person to whom it is awarded.
2. An award of distinction, prize or incentive. 3. Pecuniary
assistance granted gratuitously to a student."
[17] The
Concise Oxford Dictionary of Current English, Eighth Edition,
Clarendon Press, Oxford defines scholarship as:
"payment from the funds of a school, university, local
government, etc., to maintain a student in full-time education,
awarded on the basis of scholarly achievement."
[18] Counsel
for the appellant agreed the sums received by the players in the
form of their monthly allowance would be taxable but that one
cannot assume this renders the employment insurable - or
pensionable - for purposes of the relevant legislation. The WHL
rules and regulations - Exhibit A-1 - referred to the Standard
Players Contract which states the amount of payment which is
referred to as "player's allowance". The players
had full discretion over this amount and they were not required
to use it to pay for any expenses while travelling on the road
for away games or otherwise in connection with performing their
services as hockey players for the Wheat Kings. The player's
contract - Exhibit A-2 - in clause 12 referred to: Loss of
salary during a suspension by the club or the league. However,
under Clauses 2.1 and 2.2 there is reference to the payment as
"the allowance fixed by the rules of the WHL".
[19] While
there is an educational component attached to the contract
between the Wheat Kings and the players - and that is commendable
- the players are paid to play hockey for the team in the WHL.
They are entitled to one year's books and tuition at a
post-secondary educational institution for each year they have
played for a WHL team. It is the completion of the playing time
that gives rise to the educational entitlement. The payment for
playing hockey is modest but all their expenses are covered,
including room and board. However, the requirement to play hockey
is not inextricably bound to a condition of scholarship as may be
the case with a university since attendance at a post-secondary
educational institution was not mandatory for remaining on the
roster. In the case of Charron v. M.N.R., [1994] T.C.J.
No. 47 - Archambault T.C.J. heard an appeal from a determination
by the Minister that the appellant - a graduate student employed
by Laval University on a research project - was not engaged
in insurable employment because she was receiving university
credit for the work. Judge Archambault held that the existence of
an academic benefit did not prevent the existence of a contract
of employment and at paragraph 14 of his judgment stated:
"...Further, the fact that s. 3(1)(a) refers to
employment " under any express or implied contract of
service or apprenticeship, written or oral, whether the earnings
of the employed person are received from the employer or some
other person" indicates that Parliament clearly intended the
idea of insurable employment to be as wide as possible for the
purposes of the Act."
[20] Kelly
McCrimmon - General Manager of the Wheat Kings - stated he did
not regard the players contract as being legally binding upon
them but as a document formalizing - for league purposes mainly -
the arrangement between players and their respective hockey
clubs. The relevant provision of The Employment Standards
Act, chapter E110, Province of Manitoba, in force during the
period covered by the within appeal defines an adolescent, as
follows:
"adolescent" means a person who has reached his 16th
birthday but has not reached his 18th birthday;"
[21]
Subsection 9(2) of the said Standards Act under the
heading Agreements by Adolescent states:
"An adolescent who enters into employment is liable
thereon and has the benefit thereof as if the adolescent were an
adult."
[22] It is
extremely doubtful that Parliament was concerned about massive
unemployment among the ranks of 16 to 20-year old hockey players.
It is also difficult to imagine how unemployment would result
other than in the circumstance where a player was released
outright or was unable to play for any other team and was
therefore in need of collecting the extremely modest benefits
during a transition period. The WHL has operated for many years
and has put emphasis on the value of obtaining an education.
Kelly McCrimmon serves as a model to other players who can
continue to be involved - at some level - in the hockey industry
after their playing days have come to an end. But, the business
of the Wheat Kings is simply the business of hockey. It is a
commercial organization - albeit beloved by the citizens of
Brandon - carrying on business for profit. The players are
employees who receive remuneration - defined as cash - pursuant
to the appropriate regulations governing insurable earnings. It
would require an amendment to subsection 5(2) of the
Employment Insurance Act in order to exclude players in
the WHL - and other junior hockey players within the CHL - from
the category of insurable employment.
[23] Taking
into account the evidence, relevant legislation and
jurisprudence, I find the assessments issued by the Minister to
have been correct and the decision dated January 17, 2000
confirming those previous assessments is - itself - hereby
confirmed.
[24] The
within appeal is dismissed together with the appeal
2000-1540(CPP) which the parties agree would follow the
result.
Signed at Sidney, British Columbia, this 24th day of November
2000.
"D.W. Rowe"
D.J.T.C.C.
COURT FILE
NO.:
2000-1538(EI)
STYLE OF
CAUSE:
McCrimmon Holdings Ltd. and
32155 Manitoba Ltd., A Partnership
o/a Brandon Wheat Kings and M.N.R. and
Daryl Stockham
PLACE OF
HEARING:
Winnipeg, Manitoba
DATE OF
HEARING:
October 2, 2000
REASONS FOR JUDGMENT BY: the
Honourable Deputy Judge D.W. Rowe
DATE OF
JUDGMENT:
November 24, 2000
APPEARANCES:
Counsel for the Appellant: Pat Fraser
David Swayze
Counsel for the
Respondent:
Tracy Harwood-Jones
For the
Intervenor:
No one appeared
COUNSEL OF RECORD:
For the
Appellant:
Name:
Pat Fraser
Firm:
Meighen, Haddad & Co.
Brandon, Manitoba
For the
Respondent:
Morris Rosenberg
Deputy Attorney General of Canada
Ottawa, Canada
For the Intervenor:
Name:
Firm:
COURT FILE
NO.:
2000-1540(CPP)
STYLE OF
CAUSE:
McCrimmon Holdings Ltd. and
32155 Manitoba Ltd, A Partnership
o/a Brandon Wheat Kings and M.N.R. and
Daryl Stockham
PLACE OF
HEARING:
Winnipeg, Manitoba
DATE OF
HEARING:
October 2, 2000
REASONS FOR JUDGMENT BY: the
Honourable Deputy Judge D.W. Rowe
DATE OF
JUDGMENT:
November 24, 2000
APPEARANCES:
Counsel for the Appellant: Pat Fraser
David Swayze
Counsel for the
Respondent:
Tracy Harwood-Jones
For the
Intervenor:
No one appeared
COUNSEL OF RECORD:
For the
Appellant:
Name:
Pat Fraser
Firm:
Meighen, Haddad & Co.
Brandon, Manitoba
For the
Respondent:
Morris Rosenberg
Deputy Attorney General of Canada
Ottawa, Canada
For the
Appellant:
Name:
Firm:
2000-1538(EI)
BETWEEN:
MCCRIMMON HOLDINGS LTD. and
32155 MANITOBA LTD., A PARTNERSHIP
o/a BRANDON WHEAT KINGS,
Appellant,
and
THE MINISTER OF NATIONAL REVENUE,
Respondent,
and
DARYL STOCKHAM,
Intervenor.
Appeal heard on common evidence with the appeal
of McCrimmon Holdings Ltd. and 32155 Manitoba Ltd.,
A Partnership o/a Brandon Wheat Kings
(2000-1540(CPP)) on October 2, 2000 at Winnipeg, Manitoba,
by the Honourable Deputy Judge D.W. Rowe
Appearances
Counsel for the
Appellant: Pat
Fraser
David Swayze
Counsel for the Respondent: Tracy
Harwood-Jones
For the
Intervenor:
No one appeared
JUDGMENT
The
appeal is dismissed and the decision of the Minister is confirmed
in accordance with the attached Reasons for Judgment.
Signed at Sidney, British Columbia, this 24th day of November
2000.
D.J.T.C.C.
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