Huard v. M.N.R., docket 97-678-UI

Date: 19981022

Docket: 97-678-UI

BETWEEN:

THÉRÈSE HUARD,

Appellant,

and

THE MINISTER OF NATIONAL REVENUE,

Respondent.

Reasons for Judgment

Tardif, J.T.C.C.

[1] This is an appeal from a determination dated April 10, 1997. The determination excepted the appellant’s employment from insurable employment on the grounds that the employment in question did not meet the minimum required in terms of the number of hours worked and salary paid during the period at issue.

[2] The facts are not in dispute. They are well summarized in subparagraphs 5(a) to (e) inclusive of the Reply to the Notice of Appeal, which read as follows:

[TRANSLATION]

(a) the appellant had worked for the payer since September 4, 1990 as director of nursing;

(b) on October 16, 1990 the appellant and the payer signed an agreement for deferred pay leave covering a period of five years;

(c) until November 4, 1994, the appellant received 80% of her pay and the payer kept 20% on the appellant’s behalf;

(d) during the period at issue the appellant took unpaid leave and the payer paid her the amounts retained on her behalf;

(e) during the period at issue the appellant provided no services to the payer.

[3] The appellant’s testimony was short and clear: she briefly stated the facts giving rise to the dispute and filed documentary evidence in support of her claims, namely the contract concluded between herself and her employer, the Hôpital d’Amqui, on October 16, 1990, providing for deferred pay leave in the fifth year (Exhibit A-1), and a computer printout describing the procedure used in accordance with the contract (Exhibit A-2).

[4] The appellant first worked for a four-year period during which she received 80% of her pay and the balance of 20% was accumulated over those four years. In the fifth year of the contract she received the same pay without having to work, thus using the accumulated reserve. Accordingly the appellant, although she did not work in that fifth year, received the same salary as in the first four years during which she had worked.

[5] In practice the parties essentially argued their respective claims.

[6] The appellant maintained that the very clear contract between her and her employer set out and contained all the requirements and conditions needed in order for the period in which she received the earnings her employer had withheld in the first four years to be defined as a period in which she held insurable employment, although she did no work whatever.

[7] During the period at issue, although the appellant performed no work she received the same pay; she did not have to do any work at all for her employer as the contract provided that she was entitled to the accumulated earnings.

[8] The extended leave of a year’s duration was analogous to the vacation period resulting from any employment, especially as the duration of the vacation period is often set by contract. Moreover, the comparison was accepted and used extensively by counsel for the appellant.

[9] However, the contract on which the appellant relied made a clear distinction between the annual vacation to which the appellant was entitled and the deferred pay leave.

[10] This appears quite clearly from clauses 7 and 8 of the contract, which read as follows:

[TRANSLATION]

7.	The employer agrees that THÉRÈSE HUARD may take her annual vacation and annual sabbatical days, as provided in the contract of the director of nursing, immediately before the period of leave specified in this contract.	VACATION AND SABBATICAL LEAVE
8.	After each period of six consecutive months the employer shall provide the employee with a summary of the accumulated salary in the deferred pay leave plan.	CONTRIBUTION SUMMARY

[11] There is no doubt that the contract between the parties was perfectly regular and valid. It clearly expressed the parties’ intent and thus gave rise to rights and obligations for the signatories. However, a contract of employment, even if legitimate and legal, cannot necessarily be set up against the respondent.

[12] The only thing of interest to the respondent in a written contract is that it states, describes and defines the elements of the contractual relationship, thereby providing a source of information that is possibly useful but not indispensable in characterizing the contract under the Act. The contract may be useful as a guide, making it possible to determine whether the work was performed in accordance with the alleged contract.

[13] For employment to be insurable within the meaning of the Act, it must meet a number of essential conditions.

[14] First, it must be genuine employment: the performance of the work must be paid for, generally by the person who benefits from that work. Additionally, the performance of the work must be subject to the employer’s authority. In other words, the payer must have the power to intervene, allowing him to control and supervise the quality and effectiveness of the performance of the work being paid for. The pay must correspond to the actual value of the work done. It has to be necessary work which forms part of the economic, social, sports or cultural activity of the company.

[15] All these characteristics are temporarily suspended during the vacation period: when on vacation an employee does no work and yet still receives his salary; moreover, the employee has complete freedom as to how he uses his time, and the payer has no say in the matter.

[16] The payer has no authority or control over how an employee on vacation, who generally receives the same pay as during work periods, acts or spends his time.

[17] Why should the agreement between the appellant and her employer not be seen as simply providing for extended vacation? On reflection, I do not see how it could be otherwise. Consequently, I answer in the affirmative. This conclusion is all the more reasonable as the length of the vacation period is frequently a matter of agreement between the parties. Where vacation is involved, regardless of its duration, the respondent does not question insurability.

[18] In Attorney General of Canada v. Céline Therrien-Beaupré, A-414-92, the facts were different as they concerned prepaid leave and not, as here, leave following a period of work. That case involved borrowed leave, so to speak, requiring that the person taking the leave pay it back after having used it up.

[19] Desjardins J. A. of the Federal Court of Appeal expressed this situation as follows:

As it has been admitted that the respondent did no work during her period of leave, the remuneration she received from the employer was for future work. Accordingly, it would be more accurate to say that the respondent was on prepaid leave rather than on deferred-salary leave.

However, the same judgment deals with the case in which the leave is subsequent to a period of work.

[20] On this point Desjardins J. A. stated as follows:

In order to be persuaded of the soundness or unsoundness of each side’s arguments, we need to analyse the case of a person who is on paid vacation and compare that person’s situation to the respondent’s.

The Labour Standards Act, for example, provides that an employee who, at the end of a reference year, is credited with less than one year of uninterrupted service with the same employer, is entitled to an uninterrupted leave for a duration determined at the rate of one working day for each month of uninterrupted service, for a total leave not exceeding two weeks. Moreover, an employee who, at the end of a reference year, is credited with one year of uninterrupted service with the same employer is entitled to an annual leave of a minimum duration of two uninterrupted weeks. The indemnity relating to the annual leave is equal to 4% of the gross wages during the reference year and must be paid to him or her in a lump sum before the beginning of the leave. If a contract of employment is cancelled before the employee is able to benefit by all the days of leave to which he or she is entitled, a compensatory indemnity determined in accordance with the same rules as the indemnity relating to the annual leave must be paid to him or her. Thus if an employee leaves, he or she repays nothing. On the contrary, the employee receives a benefit which has been acquired gradually. This entire legislative scheme clearly shows that paid leave is leave that has been earned while the employee was at work.

If, on the other hand, under an agreement with his or her employer, an employee obtains one week paid leave before it is due, for example after two or three months of work, the wages received during the leave, to all appearances, would not be an amount “earned” but rather an advance on his or her vacation pay.

The same is true in the case of “deferred-salary leave”. Here, the respondent was on leave first for nine months. She then earned her full salary during her twenty-seven months of employment, except that the payment was spread over a period of thirty-six months based on payments amounting to 75% of her salary. Because her full salary was for a period of only twenty-seven months, the respondent paid unemployment insurance premiums for a period of only twenty-seven months. During her period of leave, she did no work in return for the salary she received. That salary was therefore not “earned” during the period.

[21] In the instant case, an employment relationship always existed between the appellant and her employer during the period at issue: the legal relationship had not ended and had not been broken, unlike the situation in Raymond Cloutier v. M.N.R. (90-064(UI)).

[22] The appellant created a fund out of her earnings, which she received at a reduced rate for a defined period in order to have the benefit of extended leave. This benefit was progressively accumulated out of her pay for work performed. Accordingly, in my view this was remuneration having the same characteristics as vacation pay.

[23] I therefore allow the appeal and determine that the earnings paid to the appellant during the period at issue were insurable earnings.

Signed at Ottawa, Canada, this 22nd day of October 1998.

“Alain Tardif”

J.T.C.C.

[OFFICIAL ENGLISH TRANSLATION]

Translation certified true on this 31st day of May 1999.

Erich Klein, Revisor