REASONS
FOR JUDGMENT
V.A. Miller J.
[1]
The issue in this appeal is whether the
Appellant was engaged in insurable employment during the period June 1, 2012 to
October 31, 2012 (the “Period”) when she performed services for Boyal Drywall
Services Ltd. (the “Payer”).
[2]
The Minister of National Revenue (the
“Minister”) determined that the Appellant’s employment was not insurable
because she and the Payer were not dealing with each other at arm’s length in
accordance with paragraphs 5(2)(i) and 5(3)(b) of the Employment Insurance
Act.
[3]
The Appellant’s brother-in-law, Manpreet Boyal,
owns 100% of the shares in the Payer.
[4]
The Appellant was the only witness at the
hearing. It was her evidence that she was not related by blood to the Payer.
She was engaged by the Payer as a bookkeeper/office administrator and both she
and the Payer intended that she would be an employee.
[5]
In determining that the Appellant was not
engaged in insurable employment with the Payer, the Minister made the following
assumptions of fact:
The Payer
a) the Payer provided drywall installation services in
Surrey, British Columbia;
b) the sole shareholder of the Payer’s voting shares was
Manpreet Boyal (“Manpreet”);
The Appellant
c) on June 1, 2012, the Appellant was hired by the Payer;
d) Manpreet
was married to the Appellant’s sister, Tejinder Boyal (“Tejinder”);
Terms and
conditions
e) the
Appellant and the Payer intended for the relationship to be one of employer and
employee, and agreed that the Appellant was an employee of the Payer;
f) the
Appellant duties were to record the hours worked by the Payer’s employees and
to check the Payer’s emails;
g) on a
daily basis, the Payer informed the Appellant by telephone as to the number of
hours worked by the Payer’s employees;
h) the
Appellant recorded the hours in a spreadsheet;
i) on a
biweekly or monthly basis, the Appellant verbally informed Manpreet of the
total hours worked by the employees;
j) Manpreet
recorded the total hours worked by the employees and submitted the hours to the
Payer’s accountant;
k) the
Appellant only forwarded important emails to Manpreet;
l) the
Appellant did not respond to any emails on the Payer’s behalf;
m) the
Appellant did not complete any other duties for the Payer;
n) the
Payer’s accountant did the actual payroll and bookkeeping for the Payer;
o) in
2012:
i. the
Payer had 6 employees, including the Appellant; and
ii. the
Payer had one subcontractor;
p) the
Appellant did not have set days and hours of work;
q) the
Appellant set her own schedule;
r) the
Appellant usually worked in the evenings;
s) no one
recorded the Appellant’s hours of work;
t) the
Appellant was paid for 70 hours per month, regardless of how long it actually
took to perform her duties;
u) the
Appellant was paid $16 per hour;
v) the
Payer set the Appellant’s pay rate;
w) per the
Government of Canada’s Job Bank database, data entry clerks in the Appellant’s
region were typically paid between $12.00 to $22.60 per hour;
x) the
Payer paid the Appellant by cheque on a monthly basis;
y) the
Payer’s other employees were paid every two weeks;
z) the
Payer paid any subcontractors on a monthly basis;
aa) the
Appellant’s pays included vacation pay;
bb) the
Appellant paid the majority of her pays to her sister, Tejinder, to repay a
loan;
cc) the
Appellant worked in her own home;
dd) on
October 31, 2012, the Appellant ended her employment with the Payer;
ee) the
Appellant ended the employment due to illness or injury;
ff) in the
month in which the Payer hired the Appellant, the Payer’s gross revenue had
decreased from the previous quarter;
gg) in the
month in which the Appellant ended her employment with the Payer, the Payer’s
gross revenue had increased from the previous quarter;
hh) the
Appellant was previously employed as a part-time bookkeeper at a taxi company;
ii) during
the Period, the Appellant also worked for another employer, RWM, four days per
week, six hours per day; and
jj) one
month after the Appellant’s employment ended, the Payer hired Tejinder to
perform administrative duties.
[6]
The Appellant agreed with all except two of
these assumptions. She had no knowledge of the assumptions at paragraph 10(ff)
and (gg) as they related to the Payer’s gross revenues. I will discuss the
assumptions and the Appellant’s evidence in the context of the legislation.
[7]
The circumstances of the employment considered
by the Minister and confirmed by the Appellant’s evidence were as follows.
[8]
The Payer provided drywall services in Surrey,
British Columbia. During the period, it had one subcontractor and six
employees, including the Appellant.
[9]
According to the Appellant, she was engaged by
the Payer to perform two tasks. They were to record the hours worked by the
Payer’s other employees and to check the Payer’s emails. Each day the Payer
telephoned the Appellant to tell her the number of hours worked by each
employee. She recorded the hours on a spreadsheet. The Appellant then, on a
biweekly basis, informed the Payer of the total hours for each employee. She
gave the spreadsheet she had prepared to her brother-in-law. The Payer then
submitted the hours to its accountant. The Appellant also checked the Payer’s
emails and notified it if there were any important emails. She did not respond
to any emails.
[10]
Prior to hiring the Appellant, the Payer’s
shareholder, Manpreet Boyal, performed these duties.
[11]
The Appellant worked from her home on her own
computer. She stated that she worked on average 2 to 3 hours a day. She
testified that it could have been less than “2 to 3 hours a day but it was
never more”. She had no set hours; she set her own schedule and she did not
record her hours. It was agreed between her and the Payer that she would be
paid $16 per hour for 70 hours a month regardless of the number of hours she
worked.
[12]
The Appellant was paid by cheque on a monthly
basis whereas the other employees were paid every two weeks. The subcontractor
was paid on a monthly basis.
The Legislation
[13]
Whether persons are related is determined by
section 251 of the Income Tax Act. For the purposes of this case, the
relevant provisions are paragraphs 251(1)(a), 251(6)(a) and (b), 251(2)(a),
subparagraph 251(2)(b)(ii). They read:
251 (1) For the
purposes of this Act,
(a) related persons shall be deemed not to deal with each other at
arm’s length;
Definition of
related persons
251 (2) For the
purpose of this Act, related persons, or persons related to each other,
are
(a) individuals connected by blood relationship, marriage or
common-law partnership or adoption;
(b) a corporation and
(i) a person who controls the corporation, if it is controlled by
one person,
(ii) a person who is a member of a related group that controls the
corporation, or
(iii) any person related to a person described in subparagraph
251(2)(b)(i) or 251(2)(b)(ii); and
251(6) For the
purposes of this Act, persons are connected by
(a) blood relationship if one is the child or other
descendant of the other or one is the brother or sister of the other;
(b) marriage if one is married to the other or to a person who is so
connected by blood relationship to the other;
[14]
The Appellant was the sister-in-law of the
Payer’s sole shareholder. Therefore, she was connected to the Payer’s sole
shareholder by marriage. In accordance with subparagraph 251(2)(b)(ii), the
Appellant was related to the Payer during the period and she and the Payer were
not dealing with each other at arm’s length.
[15]
The relevant statutory provision of the Employment
Insurance Act reads:
5(2) Insurable
employment does not include
(i)
employment if the employer and employee are not dealing with each other at
arm’s length.
5(3) For the
purposes of paragraph (2)(i),
(b) if the
employer is, within the meaning of that Act, related to the employee, they are
deemed to deal with each other at arm’s length if the Minister of National
Revenue is satisfied that, 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, it is reasonable
to conclude that they would have entered into a substantially similar contract
of employment if they had been dealing with each other at arm’s length.
[16]
In Birkland v Minister of National Revenue,
2005 TCC 291, Bowie J. reviewed the various decisions from the Federal Court of
Appeal that discussed this court’s role in an appeal pursuant to the above
provisions. He stated:
At this point it
is sufficient simply to state my understanding of the present state of the law,
which I derive principally from paragraph 4 of Légaré (reproduced
above) and from the following passage from the judgment of Richard C.J.,
concurred in by Létourneau and Noël JJ.A., in Denis c. Ministre du Revenu
national
5 The function of the Tax Court of
Canada judge in an appeal from a determination by the Minister on the exclusion
provisions contained in subsections 5(2) and (3) of the Act is to inquire into
all the facts with the parties and the witnesses called for the first time to
testify under oath, and to consider whether the Minister's conclusion still
seems reasonable. However, the judge should not substitute his or her own
opinion for that of the Minister when there are no new facts and there is no
basis for thinking that the facts were misunderstood (see Pérusse v. Canada
(Minister of National Revenue - M.N.R.), [2000] F.C.J. No. 310, March 10,
2000).
This Court's
role, as I understand it now, following these decisions, is to conduct a trial
at which both parties may adduce evidence as to the terms upon which the
Appellant was employed, evidence as to the terms upon which persons at arm's
length doing similar work were employed by the same employer, and evidence
relevant to the conditions of employment prevailing in the industry for the
same kind of work at the same time and place. Of course, there may also be
evidence as to the relationship between the Appellant and the employer. In the
light of all that evidence, and the judge's view of the credibility of the
witnesses, this Court must then assess whether the Minister, if he had had the
benefit of all that evidence, could reasonably have failed to conclude that the
employer and a person acting at arm's length would have entered into a
substantially similar contract of employment. That, as I understand it, is the
degree of judicial deference that Parliament's use of the expression “... if
the Minister of National Revenue is satisfied ...” in paragraph 5(3)(b)
accords to the Minister's opinion.
Analysis
[17]
The question is whether, in light of the
evidence adduced at court, would the Minister, if he had the benefit of all
this evidence, reasonably have concluded that the Payer and a person acting at
arm’s length would have entered into a substantially similar contract of
employment. It is my opinion that the answer to this question is no.
[18]
The evidence adduced at the hearing was exactly
the same as the assumptions made by the Minister.
[19]
I find it hard to believe that if the Appellant
had not been related to the Payer, she would be paid $16 per hour for 70 hours
a month regardless of the number of hours she worked. The Appellant stated that
she was hired as a bookkeeper/office administrator. However, none of her duties
involved maintaining the Payer’s books. She prepared a spreadsheet for the
Payer. At the hearing she stated that she gave the Payer the spreadsheet who in
turn gave it to its accountant. However, according to the assumptions made by
the Minister and also agreed to by the Appellant at the hearing, she verbally
informed the Payer of the total hours worked by the employees.
[20]
When I consider the testimony presented at the
hearing with respect to the remuneration paid, the terms and conditions, the
duration and the nature of the work performed, I conclude that the Minister’s
decision was reasonable. The appeal is dismissed.
Signed at Ottawa, Canada, this 6th day of December 2016.
“V.A. Miller”
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