Gendron v. M.N.R., docket 95-571-UI

Date: 19971003

Docket: 95-571-UI

BETWEEN:

RENÉE GENDRON,

Appellant,

and

THE MINISTER OF NATIONAL REVENUE,

Respondent.

Reasons for Judgment

Prévost, D.J.T.C.C.

[1]            This appeal was heard at Rivière-du-Loup, Quebec, on September 17, 1997.

[2]            It is an appeal from a determination by the Minister of National Revenue ("the Minister"), dated December 14, 1994, that the appellant's employment with the payer, Véronique Gendron, owner of Antonio Gendron Enr., from July 31 to November 20, 1992 and from January 10 to March 26, 1994 was not insurable for the following reasons: [TRANSLATION] "This was employment in which the employee and employer were not dealing with each other at arm's length, and in addition it was not held under a contract of service".

[3]            Paragraph 5 of the Reply to the Notice of Appeal reads as follows:

[TRANSLATION]

5.              In arriving at his decision the respondent Minister of National Revenue relied inter alia on the following facts.

(a)            The payer carries on a business renting and operating vending machines: it owns 50 slush machines which it operates year-round with the busy period being between April and September. (A)

(b)            The payer inherited the business on the death of her husband and is the sole owner of that business, which she continued operating under the trade name "Antonio Gendron Enr." (A)

(c)            The payer only employs two part-time employees: the appellant (the payer's daughter), and Manon Turgeon, who delivers the product. (A)

(d)            The appellant has rendered services to the payer (and previously to her father) since 1985 or 1986 and the payer summarized her duties during the periods at issue as follows: (A)

                - In 1992:                 - she had to solicit customers in order to introduce a new product, Thelma lemonade;

                                                - she had to prepare various programs for owners, co-owners or renters of the vending machines;

                                                - she had to prepare sales statistics for winter 1991 and summer 1992.

                - In 1994:                 - she had to prepare statistics for summer 1993;

                                                - she had to redo customers' contracts;

                                                - she had to do promotional work using the "Slush Puppie" mascot;

                                                - she had to prepare a map of customers by territory and prepare the program for summer 1994;

                                                - she had to contact customers in preparation for summer 1994.

(e)            The appellant worked primarily in an office located in the basement of her home and occasionally went out on the road. (D)

(f)             The payer stated that she provided the appellant with a computer to do her work; she explained that she took back the computer between the appellant's work periods (whereas the appellant said she kept it at the time). (D)

(g)            The appellant set her work schedule herself and did not have to record her hours worked. (D)

(h)            The payer said that the appellant put in 35 hours a week in 1992 and 25 hours a week in 1994, whereas the appellant stated that she put in between 20 and 25 hours a week in 1992 and between 15 and 20 hours in 1994. (D)

(i)             The appellant was paid $10 an hour; this was inconsistent with the records of employment issued in the appellant's name (and contradicted the versions of the payer and the appellant as to the number of hours worked). (D)

(j)             The payer often asked the appellant to wait to cash her paycheques as she did not have the necessary funds; a review of the cheques cashed confirmed that the appellant cashed them between two and six months late in 1992. (D)

(k)            In 1992 the appellant had her two young children, aged two and four, at home without any babysitter; in 1994 she apparently had a babysitter. (D)

(l)             The payer mentioned that in 1994 the appellant also worked for another employer during the period at issue. The appellant explained that since 1990 she had worked for the Ministère de la Chasse et de la Pêche (Department of Fish and Game) from 8:00 a.m. to 4:00 p.m. Monday to Thursday. (A)

(m)           The appellant worked alone, without the payer being present, as the latter did not have to tell the appellant what to do: the payer was in fact only interested in the final product of the appellant's work. (D)

(n)            The appellant is the payer's daughter and they are thus related within the meaning of s. 251 of the Income Tax Act. (A)

(o)            But for the relationship between her and the payer, the appellant would not have been hired to do such work. (D)

(p)            Moreover, the payer would never have hired an unrelated person on terms substantially similar to those offered to the appellant. (D)

(q)            No genuine express or implied contract of service or apprenticeship, written or oral, existed between the appellant and the payer during the period at issue. (D)

[4]            In the foregoing passage from the Reply to the Notice of Appeal the Court has indicated in parentheses after each subparagraph the comments made by counsel for the appellant at the start of the hearing, as follows,

                (A) =        admitted

                (D) =        denied

Appellant's evidence

According to her testimony:

[5]            She had a territory in the Québec area and so controlled the payer's sales as far as Edmundston in the south and Rimouski in the east.

[6]            While she admitted performing the duties described in subparagraph (d) of the Reply to the Notice of Appeal, she was also responsible for handling the placement of vending machines, checking their profitability and ensuring that the owners of convenience stores were buying the payer's products.

[7]            She generally worked in the basement of her mother's home, from which the business was run.

[8]            An advertising pamphlet (Exhibit A-1) clearly showed the "Slush Puppie" product which she marketed.

[9]            Two photos (Exhibit A-2) showed the outside of her mother's house with the payer's truck and the basement where the appellant worked.

[10]          She did not meet with customers at her mother's home but rather went to them.

[11]          She lived less than one kilometer from her mother's home where the basement office was specially set up for the work to be done: the computer was located there permanently and all the work tools were in fact owned by her mother.

[12]          The appellant might on occasion finish up work at her own home in the evening, but that was quite rare.

[13]          In the first period at issue she worked from 8:30 a.m. to 4:30 p.m., except for her lunch period, of course, and thus put in 35 hours a week for a weekly salary of $350.

[14]          Some weeks she put in more hours and others less, but on average she did indeed work 35 hours.

[15]          From time to time she neglected to cash her paycheques (Exhibits A-3 and A-4) on receipt and sometimes as well her mother asked her to delay cashing them until money came in.

[16]          However, she knew she would be paid and in fact always was paid.

[17]          She spent 70 to 75 percent of her time in the office at her mother's house, the rest of her work being done on the road.

[18]          Her mother lived above the office and was in a position to supervise her, and did so regularly in addition to giving her instructions.

[19]          The appellant's father died in 1990, but fortunately her mother knew a little about the business.

[20]          She had a child in 1992 but placed him in care in a private home so she could go and work at her mother's place.

[21]          In 1994, when she was also working for the Department of Fish and Game, she was still able to put in her 25 hours for the payer.

[22]          On Fridays she did not work for the Department of Fish and Game and after work on the other days of the week she went directly to the office at her mother's home; she also used her lunch period to go and see customers of the payer.

[23]          She had no financial involvement in the payer.

[24]          In 1993 she did not work for her mother as she was on maternity leave.

[25]          The payer replaced her herself but any soliciting she did was only by telephone.

[26]          Her mother did control her by giving her a list of customers to see and requiring that the appellant give her a report afterwards.

[27]          The appellant also had a computer at home but it was not equipped with a printer.

[28]          Her records of employment (Exhibit I-1) clearly indicated that she earned $350 a week in 1992 and $249.60 in 1994.

[29]          It is difficult to have a regular schedule when on the road, but she did nevertheless work all the hours for which she was paid.

[30]          She never met with the appeals officer, Rita Bolduc, and only spoke to her on the telephone.

[31]          The respondent called no witnesses.

Argument

According to counsel for the appellant:

[32]          His client's employment was excepted under the Act, but the Minister should have included it and was wrong not to do so.

[33]          Subparagraph (e) above is incorrect, as the evidence was that the appellant worked regularly either at the payer's place of business or on the road.

[34]          Subparagraph (f) is also wrong, as the evidence showed that the payer's computer remained at her office permanently and that the appellant's computer, which she had at her own home, did not even have a printer.

[35]          As regards subparagraph (g), the appellant did have a weekly work schedule to be met.

[36]          Her salary was quite reasonable for the work she was doing.

[37]          It is true that the payer asked the appellant to delay cashing her paycheques, but her salary was always paid in full and she therefore did not suffer any losses.

[38]          As regards subparagraph (m), the evidence was that the payer regularly supervised the appellant at the office in addition to giving her instructions.

[39]          The evidence also showed that her mother controlled the appellant by giving her a list of customers to see and requiring that a report be given afterwards.

[40]          Someone else would have had to be hired if his client had not been both present and available.

[41]          The appellant had no risk of loss and was fully integrated into the business.

According to counsel for the respondent:

[42]          Under s. 3(2)(c) of the Unemployment Insurance Act the Minister has discretionary authority, and in Ferme Émile Richard et Fils Inc. v. Department of National Revenue (A-172-94), Décary J.A., writing for the Federal Court of Appeal, stated (at p. 3):

As this Court recently noted in Tignish Auto Parts Inc. v. Minister of National Revenue, July 25, 1994, A-555-93, F.C.A. . . ., an appeal to the Tax Court of Canada in a case involving the application of s. 3(2)(c)(ii) is not an appeal in the strict sense of the word and more closely resembles an application for judicial review. In other words, the Court does not have to consider whether the Minister's decision was correct: what it must consider is whether the Minister's decision resulted from the proper exercise of his discretionary authority. It is only where the Court concludes that the Minister made an improper use of his discretion that the discussion before it is transformed into an appeal de novo and the court is empowered to decide whether, taking all the circumstances into account, such a contract of employment would have been concluded between the employer and employee if they had been dealing at arm's length.

[43]          The Minister did not make an improper use of his discretion and the Court therefore should not intervene.

[44]          There were significant delays in cashing paycheques and this is an important point to consider.

[45]          The appellant had no fixed schedule: she had to put in a certain number of hours and that was all.

Analysis

[46]          The Minister assumed that the appellant worked primarily in a basement office set up in her own home, which was not true at all as she actually worked in the office of the business, located in the basement of her mother's home.

[47]          She may from time to time have taken a little work home, but it is an uncontradicted fact that this happened quite rarely and only in order to finish work begun at the office.

[48]          The respondent also assumed that the payer provided the appellant with her computer to work at home, but on the uncontradicted evidence this is incorrect, as the payer's computer was always in her office in the basement of her home and the appellant had her own computer, albeit without a printer, at her own home.

[49]          The appellant was the only person to testify and she said that she had to meet a weekly schedule, which the Minister did not take into account.

[50]          The respondent thought the appellant had stated that she worked between 20 and 25 hours a week in 1992 and between 15 and 20 hours in 1994, but that was not at all what she said under oath at the hearing.

[51]          The records of employment (Exhibit I-1) clearly indicated that the appellant made $350 a week in 1992 and $249.60 in 1994, and the Minister wrongly stated that this was not consistent with the versions given by the appellant and her mother.

[52]          The delay in cashing the appellant's paycheques was not entirely proper, it is true, but the Court must look at all the various aspects of the relationship between the parties and in so doing the Court is of the view that it should intervene.

[53]          On the evidence, the appellant had only one child in 1992 and she put it into day care in a private home, whereas the Minister thought she had two children at home at the time without a babysitter.

[54]          The appellant freely admitted that she worked for the Department of Fish and Game in 1994, but she explained very clearly how she still managed to put in her 25 hours for the payer.

[55]          According to her testimony, which the Court accepted in its entirety, the appellant was supervised and controlled by her mother who gave her instructions, including a list of customers to see, and asked that she report to her afterwards on what she had done.

[56]          The salary of $10 an hour seems quite reasonable for the work done.

[57]          If the appellant had not been available, the payer would certainly have had to hire someone else in her stead.

[58]          All the work tools did belong to the payer.

[59]          It is natural for a competent employee to sometimes complete at home work begun at the office.

[60]          According to the uncontradicted evidence, the appellant had no financial involvement in the payer's affairs.

[61]          The appellant's explanations concerning her absence from work in 1993 and her replacement are quite credible and moreover were not contradicted.

[62]          It is true that it is hard for a person to have a regular schedule when on the road, but the appellant clearly did work all the hours for which she was paid.

[63]          She never met with the appeals officer, Rita Bolduc; they only spoke on the telephone and there were certainly some misunderstandings.

[64]          The appellant had no risk of loss because she knew very well that her mother would pay her salary in full, and that is in fact what happened.

[65]          It is certain that if the appellant had not been available someone else would have had to be hired in her place, especially for the work that had to be done on the road from time to time.

[66]          It seems clear that the investigation was botched.

[67]          The respondent made an improper use of his discretion and the hearing de novo has shown that, having regard to all the circumstances of the employment, the employer and employee would have entered into a substantially similar contract of employment if they had been dealing with each other at arm's length.

[68]          The appeal should therefore be allowed and the decision appealed from reversed.

"A. Prévost"

D.J.T.C.C.

[OFFICIAL ENGLISH TRANSLATION]

Translation certified true on this 4th day of May 1998.

Erich Klein, Revisor