A-136-96
CORAM: MARCEAU
J.A.
HUGESSEN
J.A.
DESJARDINS
J.A.
BETWEEN:
ATTORNEY
GENERAL OF CANADA,
Applicant,
-
and -
DENISE
CARON BERNIER,
Respondent.
REASONS
FOR JUDGMENT
MARCEAU J.A.
In defining the
parameters and operating rules of its unemployment insurance system for workers
who hire their services out to others under contracts of employment, the Unemployment
Insurance Act[1]
could not fail to refer constantly to self employed persons who do not hire
their services out to others but work for themselves, on their own account and
for their own profit. This is because, first of all, the contract of
employment concept that makes it possible to identify persons who hire their
services out can be understood and considered in greater detail only if it is
compared with the various contracts into which self-employed persons can
enter. A second reason is that workers who hire their services out to others
can also, at the same time or subsequently, work on their own account, which
cannot be disregarded in determining the extent and nature of the protection to
be granted. Workers who temporarily and involuntarily lose all means of
benefiting by their work are not in exactly the same situation and state of
need as those who, although losing their employment, are nevertheless deprived
of only part of what they currently receive from their work.
Thus, pursuant to
paragraphs 44(c) and (q) of the Act[2] and with the approval of the Governor in
Council, the Commission has adopted a number of regulatory provisions to be
applied to determine, first, at what time claimants who, after losing their
employment, work on their own account are no longer considered unemployed and
are accordingly not entitled to benefits, and second, what impact the income
claimants earn working on their own account while remaining unemployed has on
the calculation of the benefits to which they are entitled under the Act.[3] The provisions in question
are section 43, subsection 57(1) (definition of "employment"),
paragraph 57(2)(a), and subsections 57(6), 58(6) and 58(7) of the Unemployment
Insurance Regulations. I will reproduce them here and will underline the
relevant words:
43. (1) Subject to subsections
(2) and (3), where a claimant is
(a)
self‑employed or engaged in the operation of a business on his own
account or in partnership or a co‑adventure, or
(b)
employed in any employment other than that described in paragraph (a) in
which he controls his working hours,
he shall be regarded as working a
full working week.
(2) Where a
claimant is employed as described in subsection (1) and the employment is so minor
in extent that a person would not normally follow it as a principal means of
livelihood, he shall, in respect of that employment, not be regarded as working
a full working week.
(3) Where a
claimant is employed in farming and subsection (2) does not apply to his
employment, he shall not be regarded as working a full working week at any time
during the period that begins with the week in which October 1st falls and ends
with the week in which March 31st falls, if he proves to the satisfaction of the
Commission that during that period,
(a)
he did not work; or
(b)
the work he performed was so minor in extent that it would not have prevented
him from accepting full‑time employment.
. . .
57. (1) In this section,
. . .
"employment" means
(a)
any employment, whether insurable, not insurable or excepted employment, under
any express or implied contract of service or other contract of employment,
(i) whether
or not services are or will be performed by the claimant for any person, and
(ii) whether
or not income received by a claimant is from a person other than the person for
whom services are or will be performed;
(b) any
self‑employment whether on the claimant's own account or in partnership
or co‑adventure; and
(c) the
tenure of an office as defined in subsection 2(1) of the Canada Pension Plan;
. . .
(2) Subject to this
section, the earnings to be taken into account for the purpose of
determining whether an interruption of earnings has occurred and the
amount to be deducted from benefits payable under subsection 15(1) or (2),
17(4), 18(5), or 20(3) of the Act and for the purposes of sections 37 and 38 of
the Act are
(a) the
entire income of a claimant arising out of any employment;
. . .
(6) For the purposes
of paragraph (2)(a), "income" includes
(a) in
the case of a claimant who is not self‑employed, only that amount of his
income remaining after deducting
(i) expenses
incurred by him for the direct purpose of earning that income, and
(ii) the
value of any consideration supplied by him;
(b) in
the case of a claimant who is self‑employed in farming, only 15 per cent
of that farmer's gross income from
(i) farming
transactions, and
(ii) any
subsidies he receives under any federal or provincial program;
(c) in
the case of a claimant who is self‑employed other than in farming, only
the amount remaining of the gross income from that employment after deducting
the operating expenses, other than capital expenditures, incurred therein; and
(d) in
any case, the value of board, living quarters and other benefits of any kind
received by a claimant from or on behalf of his employer in respect of his
employment.
. . .
58. (6) The earnings of a
claimant who is self‑employed, other than in farming, or of a claimant
whose earnings are by way of participation in profits or on the basis of a
commission, shall be allocated to the week in which the services that gave rise
to those earnings are performed and, where no services are performed, allocated
to the week in which the transaction that gave rise to the earnings occurred.
(7) The earnings
of a claimant who is self‑employed in farming shall be allocated
(a) if
they arose out of a transaction, to the week in which the transaction occurred;
and
(b) if
they were received in the form of a subsidy, to the week in which the subsidy
was paid.
It is not surprising that
this set of provisions on self-employment has constantly raised difficulties of
implementation. Of course, many of these difficulties were and still are
unavoidable, since they relate to the fact that the provisions in question set
out rules applicable to a vast number of unrelated cases that must be decided
on the basis of their facts. However, some of them result from the obscurity
of the language used. The provisions contain highly equivocal ideas
(self-employment), ambiguous concepts (business, partnership, co-adventure),
unconvincing logical relationships (time spent on self-employment and the
relative importance of self-employment among the claimant’s means of
livelihood) and an imprecise concordance between their respective texts
(paragraph 43(1)(a) v. paragraph (b) of the definition of
"employment" in subsection 57(1)), while some of them are undeniably
obscure (subsections 58(6) and (7)).
Over time, as the result
of certain "constants" that have emerged from the decisions of
umpires, the application of these provisions has become more consistent and
less uncertain. First, the legal status of the operation or business in which
the self-employed person works is irrelevant. Second, the relative amount of
time spent on the operation or business is irrelevant. Third, actually
receiving income from the operation or business while unemployed is
unnecessary, as the mere right to receive such income is sufficient. These
constants were of course influenced by this Court’s only decision (as far as I
know) on the subject, Laforest v. C.E.I.C. et al., file No. A-296-86,
rendered on February 2, 1988 (CUB-12019), but I believe that they came to the
fore primarily due to what was perceived as Parliament’s intention to include
all income directly or indirectly related to work, as opposed to pure
investment income. The umpires undoubtedly thought, which is understandable,
that any work, however slight, for the business, whether incorporated or not,
remained at root, at least in part, income arising out of it.[4] However, the constants are open to
criticism: how can it be so easy to lift the corporate veil and consider the
business that of the shareholder rather than of the corporation? Does it not
encourage complete idleness to favour a claimant who carefully avoids doing
anything for the operation in which he or she has an interest over one who
spends a minimal amount of time on it? Does it not stifle the initiative of
workers to deprive them of any income they might earn working for themselves
while waiting to find regular employment on the labour market?
It is therefore
understandable that some umpires have hesitated to confirm the standard
interpretation. The decision submitted to the Court for judicial review in
fact runs counter to the prevailing case law.
The respondent submitted
a claim for benefit shortly after becoming unemployed, on October 24, 1994.
Her claim was based on two records of employment, one from the Commission
scolaire de la Mitis and the other from La Ferme Duregard Inc., a corporation
owning a dairy products business for which she had worked as a day labourer
from July 4 to October 21. The respondent held 40 percent of the shares in the
corporation and her husband held the remainder; the respondent lived on the
farm and continued to render services to the business after October 21,
although she spent no more than an hour and a half a day, five days a week,
working for it.
The Commission approved
the claim and established a benefit period after obtaining confirmation from
the Minister of National Revenue that the respondent’s employment on the farm
up until October 24 was insurable and determining that the limited time she
spent on the business over the winter did not affect her unemployed status.
Shortly thereafter, however, it informed her that pursuant to sections 57 and
58 of the Unemployment Insurance Regulations, the income she received
from La Ferme Duregard Inc. constituted earnings for benefit purposes and
therefore had to be declared. The respondent objected and appealed to the
Board of Referees, which upheld the Commission’s decision. However, the Umpire
allowed her appeal.
The Umpire relied on a
semantic argument based on a comparison between the expressions used in
paragraph 43(1)(a) and those found in paragraph 57(6)(b).
Paragraph 43(1)(a) refers disjunctively to being self-employed and being
engaged in the operation of a business, whereas paragraph 57(6)(b) does
not mention a person engaged in the operation of a business. As a result, the
Umpire argued, the fact that the respondent is engaged in the operation of a
business does not mean that this provision of the Regulations and the others
related thereto apply to her work.
This argument of
construction is clearly unconvincing. A self-employed person cannot be distinguished
from one who is engaged in operating a business. Furthermore, if the words are
to be construed literally, in the case of an incorporated business it is the
corporation that engages in operating the business, not its shareholders.
There was in fact an
argument that could have been used more convincingly to challenge the
Commission’s determination: was it logical to adopt a position in favour of the
claimant prior to October by recognizing that she was indeed an employee of La
Ferme Duregard Inc. under a contract of employment that qualified her for
benefits and then to adopt another position in October by saying that the
claimant was thenceforth "engaged in operating" La Ferme Duregard
Inc., which made it necessary to consider her earnings from the business? This
argument has already been used by an umpire to challenge the Commission’s
determination in a similar case (CUB-20498). However, to eliminate the logical
inconsistency between the two positions, it should be noted that it would suffice
for the Commission to modify the first one, which would be defensible and would
be far more unfortunate for the claimants.
It is with this in mind
that, after considering the matter at length, I am satisfied that this Court
would fail to meet the requirements and ends of justice were it to question,
and perhaps overturn, the constants that have emerged from the application of
these provisions on self-employment. If it were clear that these constants
were not supported by the wording of the provisions or contradicted the clear
intention of Parliament, there would be no reason to hesitate, but that is not
the case. In my view, it would be patently unreasonable to change an
established practice on the basis of provisions as obscure as these without
knowing what practical consequences might result from a change in direction.
Only a revised version of the provisions using less ambiguous language would
make an enlightened intervention possible, if that were Parliament’s wish. It
is my view that, as the law now stands, the Court must reproach the Umpire for
contradicting a long-standing case law without being able to base that decision
on an argument of any value.
I would accordingly allow
the application for review, quash the impugned decision and refer the matter
back to the Umpire to decide it by dismissing the appeal from the Board of
Referees’ decision.
Louis
Marceau
J.A.
"I concur.
James K. Hugessen, J.A."
"I concur.
Alice
Desjardins, J.A."
Certified true
translation
Stephen Balogh
A-136-96
OTTAWA, Ontario,
Thursday, February 27, 1997.
CORAM: MARCEAU
J.A.
HUGESSEN
J.A.
DESJARDINS
J.A.
BETWEEN:
ATTORNEY
GENERAL OF CANADA,
Applicant,
-
and -
DENISE
CARON BERNIER,
Respondent.
J
U D G M E N T
The application is
allowed, the impugned decision of the Umpire is quashed and the matter is
referred back to the Chief Umpire to be decided by himself or an umpire
designated by him on the basis that the appeal from the Board of Referees’
decision must be dismissed.
Louis Marceau
J.A.
Certified true
translation
Stephen Balogh
A-136-96
CORAM: MARCEAU
J.A.
HUGESSEN
J.A.
DESJARDINS
J.A.
BETWEEN:
ATTORNEY
GENERAL OF CANADA,
Applicant,
-
and -
DENISE
CARON BERNIER,
Respondent.
Hearing held at Québec,
Quebec on Tuesday, February 11, 1997.
Judgment delivered at
Ottawa, Ontario on Thursday, February 27, 1997.
REASONS FOR JUDGMENT
BY MARCEAU J.A.
CONCURRED IN BY: HUGESSEN
J.A.
DESJARDINS
J.A.
IN THE
FEDERAL COURT OF APPEAL
A-136-96
BETWEEN:
ATTORNEY
GENERAL OF CANADA,
Applicant,
-
and -
DENISE
CARON BERNIER,
Respondent.
REASONS
FOR JUDGMENT
FEDERAL
COURT OF APPEAL
NAMES
OF COUNSEL AND SOLICITORS OF RECORD
COURT FILE NO.: A-136-96
STYLE
OF CAUSE:Attorney General of Canada v. Denise Caron Bernier
PLACE OF HEARING: Québec,
Quebec
DATE OF HEARING: Tuesday,
February 11, 1997
REASONS FOR JUDGMENT BY: Marceau
J.A.
CONCURRED IN BY: Hugessen
J.A.
Desjardins
J.A.
DATED: Thursday,
February 27, 1997
APPEARANCES:
Carole Bureau for
the applicant
Andrée St-Pierre for
the respondent
SOLICITORS OF RECORD:
George Thomson
Deputy Attorney General of Canada
Ottawa, Ontario for
the applicant
St-Pierre & Côté
Québec, Quebec for
the respondent
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