Fecteau v. M.N.R., docket 96-1517-UI

Date: 19971028

Dockets: 96-1517-UI; 96-1518-UI; 97-66-UI

BETWEEN:

ACÉRICULTURE RÉMI LACHANCE ET FILS INC., SYLVIE FECTEAU,

Appellants,

and

THE MINISTER OF NATIONAL REVENUE,

Respondent,

and

SYLVIE FECTEAU,

ACÉRICULTURE RÉMI LACHANCE ET FILS INC.,

Interveners.

Reasons for Judgment

TARDIF, J.T.C.C.

[1]            These appeals are from two determinations to the effect that the appellant Sylvie Fecteau did not hold insurable employment with Acériculture Rémi Lachance et Fils Inc.

[2]            The first determination, dated May 16, 1996, related to the periods from February 2 to June 20, 1992, from February 15 to July 10, 1993, from January 3 to June 23, 1994, and from April 10 to September 1, 1995. The second determination, dated January 10, 1997, related to the period from December 18, 1995, to August 30, 1996.

[3]            The parties' cases were heard together on common evidence. The appellant Sylvie Fecteau testified at length; she explained that her equity participation in the company, corresponding to 20 percent of the capital stock, arose out of moves initiated and orchestrated by her spouse in order to obtain a $15,000 grant from the Quebec Department of Agriculture (ministère de l'Agriculture) under a program to encourage people to start farming businesses. She said that although she consented to those moves, she did not benefit from them.

[4]            She did not invest anything and simply carried out the wishes of her de facto spouse, who was the only one to profit from the grant he obtained to start a farming business; moreover, she argued that she had never had any interest or taken any part in the company's business; she added that her equity participation was fictitious.

[5]            She then described the work she did during the periods at issue, referring to dozens of photographs showing the layout of the premises where the commercial activities of the business were conducted. She used the same photographs to describe her work inside and outside the facilities.

[6]            She had a great many duties, including doing the company's accounting, recording reservations, greeting customers and preparing work schedules for a dozen employees. When business was slow, she handled everything herself, which is to say that she prepared and served the meals.

[7]            After the sugaring season, which lasted about ten weeks, she gave the premises a thorough cleaning, painted and did repairs to everything used in operating the business, including stoves, fans, the cold room, accessories, appliances, tables, shelves, chairs and cooking pots. The photographs indeed showed that the facilities, the furniture and the various accessories were kept in a noteworthy state of cleanliness.

[8]            The appellant added that she worked looking after a tree plantation and was responsible for transporting and splitting firewood, work that she generally did alone.

[9]            There is no doubt, and this was moreover acknowledged by the respondent, that the appellant was closely linked to the efficient operation of the business. The dispute relates mainly to the work done after the period when meals were served at the sugarhouse; the appellant claimed that she spent several weeks cleaning, which the respondent argued was greatly exaggerated.

[10]          In addition to arguing that the appellant exaggerated the time she spent working after the sugaring season, the respondent also raised the following points against the appellant:

-                She worked outside the periods at issue.

-                She was on the payroll while her spouse was collecting unemployment insurance benefits.

-                There were substantial variations in her wages and these variations were unjustified and bore no relation to the business's ability to pay.

-                Her work periods were more or less the same as the number of weeks she needed in order to collect unemployment insurance benefits.

-                She was listed on the payroll for work that was very physically demanding, such as splitting, transporting and cording the wood used in the maple syrup operation and doing painting that required the use of a ladder, while her spouse was out of work and collecting unemployment insurance benefits.

[11]          This is obviously a case in which the credibility of the witnesses is very important. Assessing the credibility of a witness is not an easy task; unfortunately, there is no foolproof formula or method. In the instant case, there is no doubt that the appellant was very closely linked to the efficient operation of the business, but was her involvement structured and confined within the parameters described by the appellant and her spouse?

[12]          Was the appellant's association with the company's business a sufficient basis for a finding that there was a genuine contract of service within the meaning of the Unemployment Insurance Act ("the Act")?

[13]          A genuine contract of service involves the performance of work in return for the payment of remuneration. The contract of employment must exist within a precise framework that includes a relationship of subordination between the payer and the person doing the work.

[14]          There must be a genuine relationship of subordination, genuine remuneration and genuine supervision; in other words, the facts must not merely be disguised to give the appearance of a contract of service.

[15]          The appellants have the burden of proof in this regard. To discharge such an onerous burden, it is generally necessary to hear testimony from both parties to the contract of employment, and their testimony must be plausible. They can, however, give greater value to their submissions by filing various documents and calling as witnesses third parties who are able to flesh out, complement and confirm the testimony of the parties to the contract of employment, especially where there are ambiguities or circumstances that make that testimony less plausible.

[16]          In the case at bar, there are a number of factors that raise questions and undermine the value of the appellant's testimony. First of all, the duration of the periods at issue is about the same as the number of weeks needed in order to collect unemployment insurance benefits; the explanations provided neither justify nor account for this coincidence.

[17]          In her testimony, the appellant stated at the outset that, despite appearances, she was not really a shareholder. She said that she acted as a sort of straw man for her spouse so that he could obtain a $15,000 grant, from which she herself did not benefit in any way. The grant was offered under a program to support and encourage people who wanted to set up in farming.

[18]          She also said that the letters of resignation she and her spouse wrote to their employer were fictitious and that they were a mere formality the purpose of which was to obtain a $93,000 loan. To obtain the loan, the borrowers had to certify that farming was their main activity, and that is why the letters of resignation were written. The payer never actually resigned from his job, which he still held at the time of the hearing.

[19]          Although the itemization of the amount borrowed refers to the sum of $10,000 payable to Rémi Lachance, the payer said that he did not pay Rémi Lachance anything for the purchase of his shares. The appellant admitted that she had on a few occasions stood surety for loans, but she hastened to add that this was unimportant and of no consequence since she had no property with which to meet her commitments; basically, she signed because her spouse asked her to.

[20]          On the basis of all these facts, it is clear to me that the appellant and her spouse were very adaptable and flexible in what they said and did and were unscrupulous when it came to obtaining financial support. They did not hesitate to sign documents certifying facts that were inconsistent with reality. Why would the same not be true of the facts relating to the insurability of the appellant's employment?

[21]          Must it be assumed that the appellant told the truth when she said that the duration of her work periods had nothing to do with qualifying for unemployment insurance benefits?

[22]          Must it be assumed that she told the truth when she said that she resumed work that was very physically demanding on April 10, 1995, after giving birth in February?

[23]          Must it be assumed that she told the truth when she said that she split wood and did painting from the top of a ladder to which she had to tie herself, and that she did this alone at a place located at some distance from the family's home, at a time when her husband was collecting unemployment insurance benefits?

[24]          It would perhaps be tricky and unwise to draw a conclusion based only on these observations. The evidence also showed that the appellant was not paid regularly; her paycheques were prepared and cashed several at a time. The appellant signed her own paycheques, which were often numbered consecutively. These facts are clearly shown by the following table:

Cheque No.            Preparation             Payable to              Signed by               Week       Amount

                Date

0996         April 1/93                Appellant               Appellant               February 20-27       $596.18

0997         March 29/93           Appellant               Appellant               March 6-12             $298.09

0998         March 29/93           Appellant               Appellant               March 13-19/93      $298.09

0999         March 29/93           Appellant               Appellant               March 20-26/93      $298.09

1000         March 29/93           Appellant               Appellant               March 27-April 3 $298.59

1059         April 13/93              Appellant               Appellant               April 4-10                $298.59

1080         April 22/93              Appellant               Appellant               April 11-17              $298.59

1098         April 28/93              Appellant               Appellant               April 18-24              $298.59

1116         May 13/93              Appellant               Appellant               May 2-8 $298.59

1118         May 19/93              Appellant               Appellant               May 9-15                $298.59

1125         May 27/93              Appellant               Appellant               May 16-22              $298.59

1130         June 2/93                Appellant               Appellant               May 23-29              $298.59

1135         June 10/93              Appellant               Appellant               May 30-June 5       $298.59

1137         June 17/93              Appellant               Appellant               June 6-12                $298.59

1141         June 23/93              Appellant               Appellant               June 13-19              $298.59

1145         July 6/93                 Appellant               Appellant               June 29-July 3        $292.81

1151         July 27/93               Appellant               Appellant               July 4-10                 $292.81

1152         July 27/93               Appellant               Appellant               4%           $254.83

1359         April 18/94              Appellant               Appellant               January 16-22         $351.43

1360         April 18/94              Appellant               Appellant               January 23-February 9          $351.43

1376         April 25/94              Appellant               Appellant               February 6-12         $351.43

1377         April 25/94              Appellant               Appellant               February 13-19       $351.43

1404         May 10/94              Payer       Appellant               February 20-26       $244.63

1405         May 10/94              Payer       Appellant               February 27-March 5            $244.63

1406         May 10/94              Payer       Appellant               March 6-12             $244.63

1407         May 10/94              Payer       Appellant               March 13-19           $244.63

1408         May 10/94              Payer       Appellant               March 20-26           $244.63

1409         May 10/94              Payer       Appellant               March 27-April 2 $244.63

1410         May 10/94              Payer       Appellant               April 3-9 $244.63

1411         May 10/94              Payer       Appellant               April 10-16              $244.63

1412         May 10/94              Payer       Appellant               April 17-23              $244.63

1413         May 10/94              Payer       Appellant               April 23-30 + 4%    $363.21

1417         May 12/94              Appellant               Appellant               February 6-12         $351.43

1418         May 12/94              Appellant               Appellant               February 13-19       $351.43

1419         May 12/94              Appellant               Appellant               February 20-26       $351.43

1420         May 12/94              Appellant               Appellant               February 27-March 5            $351.43

1421         May 12/94              Appellant               Appellant               March 6-12             $351.43

1422         May 12/94              Appellant               Appellant               March 13-19           $351.43

1423         May 12/94              Appellant               Appellant               March 20-26           $351.43

1424         May 12/94              Appellant               Appellant               March 27-April 2 $351.43

1437         May 26/94              Appellant               Appellant               April 3-9 $351.43

1438         May 26/94              Appellant               Appellant               April 10-16              $351.43

1439         May 26/94              Appellant               Appellant               April 17-23              $351.43

1440         May 26/94              Appellant               Appellant               May 8-14                $351.43

1441         May 26/94              Appellant               Appellant               May 1-7 $351.43

1442         May 26/94              Appellant               Appellant               May 25-28              $351.43

1443         May 26/94              Appellant               Appellant               May 29-June 4       $351.43

1469         August 16/94         Appellant               Appellant               June 5-11                $351.43

1470         August 16/94         Appellant               Payer       June 12-18              $351.43

1471         August 16/94         Appellant               Payer       June 19-25              $351.43

1472         August 16/94         Appellant              Payer       4%           $338.37

[25]          The timing and duration of the appellant's work periods varied a great deal even though she was doing more or less the same work for a business that was always engaged in the same activities during the periods at issue. When the appellant's spouse was asked why the appellant did very physically demanding work while he, the owner of the payer's shares, was out of work and collecting unemployment insurance benefits, he answered that he did not like that kind of work.

[26]          He said that if the appellant had not done the work, he would have had to have someone else do it. Since he was very concerned about the financial aspect of his business, why did he not in fact have the work done by third parties, whom he would probably have paid at the minimum wage? No answer was given to this question. I doubt that the cleaning work and the transporting and cording of wood would have commanded wages of $10 and $12 an hour such as were paid to the appellant.

[27]          The weight of the evidence establishes that the appellant and her spouse were working together to build up significant assets.

[28]          They left no stone unturned in attempting to reach their goal, even going so far as to make false representations in order to obtain the maximum financial support available.

[29]          The appellant, a dynamic person very devoted to her work, was very much involved in the business, which she said was owned solely by her de facto spouse.

[30]          Nevertheless, her participation does not amount to a genuine contract of service within the meaning of the Act. I believe that the work done by the appellant was helpful and necessary to the efficient operation of the business. However, I do not believe that she worked full time for periods as long as those described at the hearing. Outside the periods at issue, she performed all the duties related to managing the company. That work did not take much time, of course, but it was nevertheless a responsibility she assumed as well during the periods at issue. Moreover, her wages were too high given the nature of her work. Finally, I do not believe the statement by her spouse, the payer, that he did not work and had the appellant do much of the work described.

[31]          Finally, the content of the two statutory declarations signed by the appellant fully confirms the facts brought out by the weight of the evidence.

Statutory Declaration to the Commission - Exhibit I-1

[TRANSLATION]

. . . I am free to set my own hours of work and work schedule. I could start later and finish later if that suited me. From the beginning of July until the end of September 1995, François worked elsewhere and was I honest enough to put in my time. The reason François was at times unemployed while I was receiving a salary from the business is that I was willing to do this and so I did it.

                I have made this declaration freely and have reread both pages before signing them, and the declaration summarizes the interview and the facts.

October 12, 1995 (Emphasis added.)

Statutory Declaration to the Commission - Exhibit I-2

[TRANSLATION]

                Further to my declaration of October 12, 1995, I have come to provide the explanations you need concerning my entitlement to benefits, and I agree to my spouse, François Lachance, being present at the interview. . . .

                There is no control exercised over my work, and when François comes home, he can see whether or not I have done my job. I do not have a work schedule, and the hours I work vary. . . . I am free to set my own hours of work; I can start later and finish later.

                I can take on the responsibility of hiring and firing people when François is not there.

                The instructions François gives me relate to what I do in the woods, painting, etc., but we consult each other about everything. As for the loan we received, François and I both assumed responsibility for it when we obtained it. . . .

                François and I are authorized to sign the business's cheques. The reason I signed cheques during the periods when I was unemployed is that I was paying accounts, and I was not paid anything for doing that. As for the fact that I received my paycheques in blocks, it was because we did not have enough money, and so I waited. The employees are paid their wages as we go along.

                I continue providing services, without pay, while I am unemployed, since the business is in my home. I did not say anything about that on my cards as I did not consider it to be work.

                The reason François is at times unemployed while I am on the payroll is that I am available to do the work. . . .

                I have made this four-page declaration freely in the presence of my spouse, François Lachance. I have reread it in full before signing it, and it states the truth.

November 8, 1995 (Emphasis added.)

[32]          The appellant had a very special status in relation to the payer business. She herself supervised and planned the performance of her work. She signed her own paycheques. She waited a very long time before being paid. When she was paid depended on how much money the company had available. She agreed to a substantial decrease in her wages, the real reason for which was never shown since the appellants did not see fit to file the financial statements.

[33]          These factors are a sufficient basis for a finding that while the appellant's association with the payer involved a legal relationship that might resemble a contract of employment on the surface, it was nothing of the kind either in fact or in law. This is quite clear from the following facts:

-                All of the employees were paid in the customary way, that is, within days of doing their work. The appellant put up with very long delays in being paid, and her being paid often depended on how much money the company had available.

-                During the periods at issue, only the cook was given a pay increase, and that increase was much smaller than the increases given to the appellant, who was paid as follows:

                1992 = $8.00/hour                  1995 = $12.00/hour

                1993 = $10.00/hour                                1996 = $9.00/hour

                1994 = $12.00/hour

-                During the last period at issue, the appellant's wages were reduced by 30 percent; there is no evidence that the cook's wages were similarly reduced.

[34]          Since the appellant waived her entitlement to a portion of the company's capital stock, since she agreed to a substantial reduction in pay, since she agreed to work much longer for about the same wages, since she agreed to work without pay outside the periods at issue, since she accepted long delays in being paid and since she was given pay increases much greater than any given the other employees, she cannot claim to have been merely an employee of the business.

[35]          The weight of the evidence showed convincingly that the appellant and her spouse spared no effort in building up assets for themselves. They took maximum advantage of all available financial support programs and did not hesitate to provide inaccurate information.

[36]                          Unemployment insurance is not a small business support program; it is essentially a social program designed to assist people who have lost their jobs; specific conditions must be met for such assistance to be provided. There must be genuine employment necessitated by the economic reality of the business creating that employment. In other words, the employment periods must be determined essentially by the needs of the business.

[37]          In the case at bar, the explanations provided by the appellant and her spouse are not plausible. I am referring, inter alia, to the duration of the work periods. Moreover, it was shown that the appellant handled the company's affairs outside the periods at issue.

[38]          To exclude these facts from the analysis, it is not sufficient to claim that this was not work or to play down the importance of this work done outside the periods at issue.

[39]          It is clear from the evidence that the appellant was closely linked to the efficient operation of the business. She performed work on an annual basis; she handled everything, as if she were a co-owner. The fact that the appellant and the payer decided to try to make it look as if the appellant's work was performed under a contract of service in no way obliges this Court to recognize such a contract. The analysis for the purposes of determining whether there was a genuine contract of service during the periods at issue must be based only on real, plausible and likely facts.

[40]          In the case at bar, the evidence clearly showed that there was no contract of service within the meaning of the Act; rather, the appellant did her work in the context of a joint, shared business. The two statutory declarations speak volumes about the lack of control over the appellant's work. Moreover, I do not accept the explanations provided by the appellant and her spouse with regard to the existence of a relationship of subordination; I believe that they have distorted reality.

[41]          Unemployment insurance is a social program established to help those who really lose their jobs, whether temporarily or permanently; there must be genuine employment and a genuine layoff, since unemployment insurance is not a financial support program to help small businesses develop.

[42]          The work the appellant did for the payer during the periods at issue did not meet the requirements and criteria which, under the Act and according to the case law, must be met in order for employment to be considered as being held pursuant to a contract of service.

[43]          For these reasons, the appeals are dismissed.

"Alain Tardif"

J.T.C.C.

[OFFICIAL ENGLISH TRANSLATION]

Translation certified true on this 2nd day of July 1998.

Erich Klein, Revisor