Citation: 2012 TCC 128
Date: 20120420
Docket: 2011-855(EI)
BETWEEN:
ANDRÉ LEBLOND AND ALINE LAGRANGE,
Appellants,
and
THE MINISTER OF NATIONAL REVENUE,
Respondent.
[OFFICIAL ENGLISH
TRANSLATION]
REASONS FOR JUDGMENT
Jorré J.
[1]
The respondent
determined that Yves Leblond (the worker) did not hold insurable employment
during the periods from October 24 to November 21, 2009 (the first period),
from June 14 to July 16, 2010 (the second period), and from August 2 to
27, 2010 (the third period), when he was employed by the appellants (the
payers).
[2]
The
appellants are challenging this determination.
[3]
The
respondent does not dispute that the worker was an employee of the appellants.
[4]
However,
the respondent concluded that the worker held excluded employment because the
worker and the payers would not have entered into a similar contract of
employment if they had been dealing with each other at arm's length.
[5]
The
relevant provisions of the Employment Insurance Act are the following subsections
of section 5:
(2) Excluded employment — Insurable employment does not include
. . .
(i) employment if the employer and
employee are not dealing with each other at arm's length.
(3) Arm's length dealing — For the purposes of paragraph (2)(i),
(a) the question of whether
persons are not dealing with each other at arm's length shall be determined in
accordance with the Income Tax Act; and
(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.
[6]
This
is mostly a question of fact.
[7]
The
appellants are sole proprietors of a farm and the worker is their son.
[8]
The
appellants did not dispute that they were related to the worker within the
meaning of the Income Tax Act.
[9]
In Lavoie
v. M.N.R., 2010 TCC 580, Justice Bédard summarizes the role of
the Court as follows at paragraphs 7 to 9:
7 The Federal Court of Appeal has repeatedly defined the role conferred on
Tax Court of Canada judges by the Act. That role does not permit the judge to
substitute his or her discretion for the Minister's, but does involve an
obligation to "verify whether the facts inferred or relied on by the
Minister are real and were correctly assessed having regard to the context in
which they occurred, and after doing so, . . . decide whether the
conclusion with which the Minister was "satisfied" still seems
reasonable" (see Légaré v. Canada (Minister of National Revenue -
M.N.R.), [1999] F.C.J. No. 878 (QL), at
paragraph 4).
8 In other words, before deciding whether the Minister's conclusion still
seems reasonable to me, I must verify, in light of the evidence before me,
whether the Minister's allegations are in fact correct, having regard to the
factors set out in paragraph 5(3)(b) of the Act. At issue, then, is
whether appellant Lavoie and the payer would have entered into a substantially
similar contract of employment if they had been dealing with each other at arm's
length.
9 Appellant Lavoie had the burden of proving that the Minister did not
exercise his discretion in accordance with the principles that apply in this
regard, essentially, that the Minister did not examine all of the relevant
facts or failed to have regard to all of the facts that were relevant.
[10]
Consequently,
having heard all of the evidence, I must determine whether the Minister's
conclusion that the payers and an arm's-length person would not have entered
into a substantially similar contact of employment still seems reasonable to
me.
[11]
The
appellants testified as did Donald Royer, a farmer, and Claire Grant,
a rulings officer in employment insurance at the Canada Revenue Agency. The appellants were not
represented by counsel.
[12]
In
making his determination, the Minister relied on the following assumptions of
fact:
[Translation]
(a) Since January 1, 1978, André Leblond and Aline Lagrange have
operated a farm raising cattle and rabbits for meat, of which they are the sole
proprietors;
(b) The appellants' activities are
agriculture, excavation, foundations, construction, tree clearing, drainage,
raising livestock, feeding, cleaning, manure spreading, transportation,
equipment and machinery maintenance and accounting;
(c) The farm has several buildings,
60 head of cattle and 8,000 to 9,000 rabbits;
(d) The farm operates year-round;
(e)
Normally, the farm's
owners run the farm without outside help;
(f)
Occasionally, the
appellants hire employees for periods ranging from 1 to 5 months, and the
employees are usually part of their family;
(g)
The worker started
working for the appellants in 2009;
(h)
The worker's duties
for each period of work were as follows:
• From October 21 to
November 21, 2009, the worker worked with his father on building a steel shed
[a garage], fed the livestock and cleaned the buildings;
• From June
17 to July 16, 2010, the worker fed the livestock, did the cleaning,
cut and stored firewood, did mechanical maintenance and haying;
• From August 2 to 27, 2010, the worker fed the livestock, cleaned, did
welding for cattle feeding installations and did installation work;
(i) The worker's schedule was
determined by the appellants and varied by work period, namely, for the first
period, the work was full time, 48 hours per week, while for the other two
periods, the work was part time, 15 hours per week;
(j) The worker had no set schedule,
especially during the last two periods during which the hours worked were quite
variable and could be done during the day or at night depending on when he was
available;
(k) During all of the periods at
issue, the appellants kept track of the hours worked by the worker;
(l) The worker's duties were
determined by André Leblond as were priorities and deadlines;
(m)
The worker had to
comply with the appellants' requirements, for example, not to smoke on the
business's premises;
(n)
The appellants
provided all tools needed by the worker to perform his duties;
(o)
André Leblond determined
the worker's pay by consulting the "Online Placement" guide and set
it at $14.10 per hour;
(p)
According to Emploi-Québec,
the hourly wage for an agricultural worker in 2007-2009 was between $9 and
$13.79.
(q)
The worker was paid
based on the hours actually worked.
(r)
The worker was paid
in cash every week;
(s)
The appellants
deducted an amount for his room and board from the worker's pay;
(t)
The worker did not
receive vacation pay;
(u)
If the worker had not
been available for building the shed or cutting trees, according to Aline
Lagrange, the work could have waited or been done by her spouse and herself,
but if the work had been urgent, they could have hired someone else;
(v)
It was agreed between
the parties that, when the worker had a full-time job elsewhere, priority was
given to that other job;
(w)
In addition, Aline
Lagrange stated that the appellants did not obligate the worker to help out at
the farm when he had a full-time job elsewhere;
(x)
From June 14 to
July 16, 2010, that is, during 5 weeks, the worker worked 40 hours
per week spread over 5 days for Construction G.P. Martineau and 15 hours per
week for the appellants. On July 5, 2010, he added another 40‑hour‑per‑week
job spread over 5 days for Fraisière Michel Perreault. Therefore, for 2 weeks,
the worker worked 95 hours per week for 3 employers;
(y)
From August 2 to
27, 2010, that is, during 4 weeks, the worker worked 40 hour per week
for Fraisière Michel Perreault and 15 hours per week for the appellants;
(z)
On August 4, 2010,
the appellants issued the worker a record of employment bearing number A87619289
indicating June 14, 2010, as the first day of work and July 16, 2010, as the
last day of work, 75 insurable hours and $1,067.50 in insurable earnings;
(aa)
On August 27, 2010,
the appellants issued the worker a record of employment bearing number A88543961
indicating August 2, 2010, as the first day of work and August 27, 2010, as the
last day of work, 60 insurable hours and $846.00 in insurable earnings;
(bb)
According to HRSDC,
the worker needed these hours to be eligible for employment insurance benefits;
Remuneration and conditions of employment
[13]
The worker was paid per
hour and the appellants deducted a small amount from his pay for his room and
board.
[14]
Although the respondent's
report on an appeal seems to have retained as one of the reasons for the
determination the fact that, during the first period at issue, the worker did
very little work, which did not warrant the number of hours paid during that
period,
paragraph 6 of the Reply to the Notice of Appeal does not list assumptions of
fact that would support such a reason.
[15]
Having considered all
of the evidence, including the testimony of André Leblond, I find that, in
the first period, the employment was real and corresponded to the hours paid.
[16]
As for remuneration,
the respondent assumed that, according to Emploi‑Québec, from 2007 to 2009,
the hourly wage for an agricultural worker was between $9 and $l3.79. Given
that the periods at issue were in 2009 and 2010, and that the worker performed
various tasks including welding, $14.10 does not seem to be outside the norm
for the period at issue.
Would the appellants have hired a third party if the
worker had not been available?
[17]
The
Minister assumed the following:
1.
If
the worker had not been available to build the shed [garage], this work could
have waited or been done by the appellants, but, if the work had been urgent,
the appellants would have hired someone else.
2.
It
was agreed between the appellants and the worker that, when the worker had a
full-time job elsewhere, priority was given to that other job.
3.
The
appellants did not obligate the worker to help out at the farm when he had a
full-time job elsewhere.
[18]
The worker moved back
in with his parents in the fall of 2009. He had left home 14 years earlier.
[19]
When the worker
returned to live at home, he did not have a job.
[20]
André Leblond offered
him construction work; they worked together on expanding a garage during
the first period at issue. During that same period, the son also took care of
the rabbits. During that period, Yves Leblond worked full time for about
48 hours per week.
[21]
No evidence proving the
urgency of expanding the garage was filed.
[22]
During the second and
third periods at issue, the worker worked around 15 hours per week.
[23]
During the second and
third periods, the worker had two other full-time jobs. He worked for a contractor,
and then he worked at a strawberry farm.
[24]
The worker did his work
at the farm early in the morning or in the evening before or after his
full-time jobs. He took care of the rabbits, picked up wood, did welding. The
welding was done in a building that had been used for the rabbits but which the
farm was converting into a cattle barn.
[25]
During the second and
third periods, by mutual agreement, the worker's full‑time jobs were his
priority.
[26]
Other than during the
worker's work periods and on the few rare occasions when their other children
helped them out, the appellants worked alone in 2009 and 2010.
[27]
In 2009, another one of
their sons, Étienne, took two weeks' vacation from his regular job and worked
with his father during that time haying. Étienne was not paid for this work.
[28]
The other children were
not paid when they helped out. However, they were rewarded.
[29]
André Leblond testified
that, as he got older, he needed more help, especially with haying season.
However, the evidence does not show that people other than the worker had been
hired with pay during the two years at issue, namely, 2009 and 2010.
[30]
The appellants'
evidence failed to rebut the assumptions of fact found at paragraph 17.
Analysis
[31]
For the appellants and
the worker to be deemed to be dealing with each other at arm's length, the
Minister must be satisfied, having regard to all of the circumstances,
including the nature and duration of the work, that they would have concluded a
substantially similar contract of employment if they had been dealing with each
other at arm's length.
[32]
I cannot help but find
that the worker, the appellants' son, was hired because he was available, but
that an unrelated third party would not have been hired during these periods to
do the same work. If the son had not been available, the work would have been
done by the appellants or would have waited (in the case of expanding the
garage).
[33]
If no employee would
have been hired to do the work,
I do not see how it would be possible to find that the appellants would have
entered into a substantially similar contract of employment with a person at
arm's length. Such a contract would not have been concluded with a third party.
[34]
Accordingly, I do not
see how I could find that the Minister's decision was not reasonable.
Conclusion
[35]
It follows that I must
dismiss the appeal.
Signed at Ottawa, Canada, this 20th day of April 2012.
"Gaston Jorré"
Translation certified true
on this 8th day of June 2012
Margarita
Gorbounova, Translator
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