Citation: 2012 TCC 47
Date: 20120210
Dockets: 2010-2093(EI)
2010-2162(EI)
BETWEEN:
2868-3977 QUÉBEC INC.,
JACQUES COSSETTE,
Appellants,
and
THE MINISTER OF NATIONAL REVENUE,
Respondent.
[OFFICIAL ENGLISH
TRANSLATION]
REASONS FOR JUDGMENT
Jorré J.
[1]
The appeals of
2868-3977 Québec inc. (payer) and Jacques Cossette (worker) from the decision
of the Minister of National Revenue were heard on common evidence.
[2]
The worker electronically
filed a claim for employment insurance benefits on December 14, 2009.
[3]
This claim indicates
that the employer was the La Jeannoise residence, that is, the company
2868-3977 Québec inc., that the first and the last days of work were December
9, 2008, and November 26, 2009, respectively, and that the residence belonged
to the worker’s common-law partner, Françoise Richer.
[4]
The Minister made the
first determination on March 4, 2010, and concluded that the worker had not held
insurable employment from December 9, 2008, to November 26, 2009.
[5]
The worker appealed
that decision, and the appeal was mailed on March 31, 2010. The Canada
Revenue Agency confirmed the decision in a letter dated June 4, 2010, and
the two appellants appealed that decision to this Court.
[6]
The relevant provisions
of the Employment Insurance Act are the following subsections of section
5:
(2) Insurable employment does not include
. . .
(i) employment if the employer and employee are not dealing
with each other at arm’s length.
(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.
[7]
The respondent does not
dispute the existence of a contract of employment within the meaning of the Civil
Code of Québec.
[8]
However, the respondent
claims that the employment was not “insurable employment” because paragraph
5(2)(i) of the Employment Insurance Act applies, while the
exception in paragraph 5(3)(b) does not.
[9]
The appellants concede
that they are not dealing with each other at arm’s length within the meaning of
paragraph 5(2)(i), but claim that the exception at paragraph 5(3)(b)
applies.
[10]
These are essentially
questions of fact.
[11]
In Lavoie v. M.N.R., Bédard J.
summarized 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.
[12]
Having heard all of the
evidence, I must therefore decide whether the Minister’s conclusion that the
payer and an arm’s length person would not have entered into a substantially similar
contract of employment seems reasonable to me.
[13]
In rendering his
decision, the Minister relied on the following assumptions of fact:
[Translation]
5. . . .
(a) The appellant was incorporated on November 4,
1991;
(b) The appellant’s sole shareholder was Françoise
Richer;
(c) The appellant operated a residence containing 30
apartments for independent seniors and those who were losing some of their
independence;
(d) Each apartment consisted of a bedroom, a living
room and a full bathroom;
(e) Meals were served in a common dining room;
(f) The residence was sold on December 1, 2009;
(g) The worker lived on site;
(h) The worker was hired by the appellant as a
full-time maintenance worker;
(i) The worker’s duties were to do all maintenance
and repair work for the building, insulate around window frames, cut the grass,
shovel 35 porches and paint rooms;
(j) Before hiring the worker, the appellant had not
employed anyone to do this type of work;
(k) Until this fact was presented to them, neither
the worker nor the appellant recalled that the worker had already worked for
the appellant from November 6, 2006, to November 15, 2007, that he had
stopped working to undergo surgery and that his medical leave had continued
until March 18, 2008.
(l) The parties agree that, before the worker was
hired in 2006, when work accumulated, the shareholder would do it with the help
of her five children and the worker on a voluntary basis.
(m) Between the worker’s two periods of employment,
the appellant did not replace him;
(n) The appellant stated that the worker had worked
30 to 35 hours over 4 days per week, while the worker stated that he had worked
40 hours over 4 to 5 days per week.
(o) Other employees of the appellant are paid for 30
hours per week, except for cooks, who work 40 hours per week;
(p) The appellant told the worker what work to do;
(q) All tools needed by the worker to do the work
were provided by the appellant;
(r) The appellant paid the worker $15 per hour;
(s) The worker was paid by cheque every week;
(t) The worker was entered in the appellant’s payroll
journal starting only on March 9, 2009, for 3 or 4 days, that is, 31 or 40 hours
per week, though he is supposed to have been employed full time since December
9, 2008;.
6. . . .
(a) The appellant’s sole shareholder was Françoise
Richer;
(b) Françoise Richer is the worker’s common-law
partner.
7. . . .
(a) During the first 16 years of operation, the
appellant did not hire anyone to do the worker’s work;
(b) The worker was employed the first time from
November 6, 2006, to November 15, 2007, and the second time during
the period at issue, namely, from December 8, 2008, to November 26, 2009;
(c) Between the two periods of employment, the
appellant did not replace the worker, who was on medical leave until March 18,
2008;
(d) The worker returned to work only on December 8,
2008, and was entered in the appellant’s payroll journal only in March 2009 for
six days of work;
[14]
Ms. Richer and the
worker testified, as did Lyne Courcy, appeals officer at the Canada Revenue
Agency.
[15]
The worker operated a
small transportation business, which provided transportation for
Abitibi-Consolidated. This business ceased its operations after the truck
burned out, and it was only after that incident that the worker became an employee
of the payer.
[16]
The first time, the
worker was employed by the payer from November 6, 2006, to November 15,
2007.
[17]
This first period ended
when the worker had to undergo surgery. He was on medical leave until March 18,
2008. Eventually, he started a second period of work with the payer.
[18]
After 2007, it became
mandatory for the payer to have employees trained in first aid and CPR.
[19]
In 2008, after the
first period of work for the payer and before the second period of work, the
worker took first-aid and CPR classes.
[20]
In their testimony, the
worker and Ms. Richer seemed very uncertain of the date when the second period
of work began.
[21]
Later, in
cross-examination, the worker seemed to agree that he had started working in
December 2008, and he stated that when he was working, he was paid.
[22]
A little while later,
in redirect, in response to a leading question, the worker contradicted himself
and stated that he had not been paid for his work in December 2008 and
January and February 2009.
[23]
However, the claim for
benefits indicates very clearly that the work started on December 9, 2008.
[24]
The worker’s statutory
declaration also claims that December 9 is the first day of work.
[25]
The record of
employment dated December 14, 2009, indicates December 29, 2009, as the
first day of work. Given the date of the document and the fact that the work
had finished on November 26, 2009, there must be a typo with regard to
2009 as the year during which the first day of work occurred. It must be 2008.
[26]
I do not hesitate in
concluding that the second period of work began on December 9, 2008.
[27]
The worker reported no
employment income in 2008.
The employee payroll journal shows that the worker was not paid until the week
of March 8, 2009.
[28]
I also find that the
worker was not paid for the work he did in December 2008 and January and
February 2009.
[29]
The worker’s duties
were about the same during the first period of work and the one at issue.
[30]
Based on the evidence,
the worker
(a) was
always paid for 31 or 40 hours per week;
(b) did not have set work
hours, and his work hours could vary considerably from day to day and from week
to week; some days, he only had a little bit of work to do, but there were also
exceptionally busy weeks, during which he worked a very large number of unpaid
hours;
(c) worked for more hours
than he was paid for;
(d) had to be able to
respond to emergencies at any time.
[31]
Ms. Richer testified
that employees did not record their hours of work and received a fixed salary,
even though they could leave early if the work was finished. However, if an
employee came in early, he or she was not paid extra. She gave the example of
cooks, who received a fixed weekly salary, even though they alternated between
three- and four-day weeks.
[32]
I do not believe that
the duties of other employees such as cooks or cleaners can be compared to
those of the worker.
[33]
The other employees’
work hours could vary slightly, but the degree of variation was not at all
comparable to that of the worker’s hours. Although the time the cooks needed to
prepare meals could vary slightly, it was still relatively stable, just as the
time needed to clean rooms could vary but was relatively stable.
[34]
In contrast, emergency
repairs and snowstorms are very unpredictable thus making the worker’s work hours
much more variable than those of other employees.
[35]
In addition, because he
lived on site, the worker was available around the clock.
[36]
Between the two periods
of work, the worker worked for several hours each week. During his convalescence,
his duties were very limited.
[37]
However, once he
returned to work in December 2008, a little more than a year after he had
stopped working on November 15, 2007, I am not convinced that he limited
himself to a few hours of work like he did during his convalescence after the
surgery.
[38]
Overall, the evidence
does not show a difference between the period from December 2008 to
February 2009 and the period of work that followed. At one point, the worker
testified that he had not worked or worked very little during the period from
December 2008 to February 2009, but I do not accept this answer.
[39]
Consequently, I am
satisfied that the worker did basically the same work throughout the entire
period at issue.
[40]
An arm’s length
employee and the payer would not have entered into a substantially similar
contract of employment. I have made this finding for two reasons.
[41]
First, given the
extreme variability of the worker’s work hours, it is doubtful that the payer
and the worker would have entered into a contract where the worker was always
paid for 31 or 40 hours.
[42]
Second, it is clear
that, if they were dealing with each other at arm’s length, the payer and the
employee would not have entered into a contract of employment in which the
worker would not be paid for the first two or three months out of 11 or 12
months, even though the employee had to perform basically the same tasks
throughout the entire period.
[43]
The worker stated that
the unpaid period of work from December 2008 to February 2009 should
not be taken into account and referred to the Federal Court of Appeal decision in
Théberge v. Canada.
[44]
Théberge does not apply to the circumstances of
this case.
[45]
First, Théberge
is in a specific context of agriculture, and its application should not be over-generalized.
[46]
Second, in Théberge,
the volunteer work done by the worker consisted of 10 to 15 hours per week,
while that same worker worked 40 to 80 hours per week during the paid period. The
amount of work was different during the two periods, and the nature of the work
was also very different during the two periods.
[47]
In this case, the
period that is similar to the unpaid period in Théberge is the period
from mid-November 2007 to the beginning of December 2008; during this period,
the worker did some work as he was able, for example, answering the telephone. Starting
in December 2008, the worker did the same work as that which he did from March
to the end of November 2009.
[48]
Considering my finding
that an arm’s length employee and the payer would not have entered into a
substantially similar contract of employment, the Minister’s decision seems
reasonable to me and I must dismiss the appeals.
Signed at Ottawa, Ontario, this 10th day of February 2012.
“Gaston Jorré”
on this 23rd day of May 2012
Margarita Gorbounova, Translator
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