Citation: 2012 TCC 82
Date: 20120329
Docket: 2011-1876(EI)
BETWEEN:
DIANE JACQUES,
Appellant,
and
THE MINISTER OF NATIONAL REVENUE,
Respondent.
[OFFICIAL ENGLISH
TRANSLATION]
REASONS FOR JUDGMENT
Angers J.
[1]
This is an appeal from a
determination of the Minister of National Revenue (the Minister), according to
which the employment held by Diane Jacques (the appellant) with Gestion Sergili
inc. (the payer) from September 1, 2005, to January 29, 2006, from January 18,
2007 to January 25, 2008, and from January 11, 2010 to June 25, 2010,
was not insurable employment within the meaning of paragraph 5(2)(i) and
subsection 5(3) of the Employment Insurance Act (the Act). The Minister
determined that the appellant and the payer were not dealing with each other at
arm's length in the context of this employment. Paragraph 5(2)(i)
of the Act provides that employment is not insurable in such a situation. It
was admitted that the appellant and payer are related within the meaning of the
Income Tax Act.
[2]
The Minister, therefore,
proceeded to analyze the factors set out in subsection 5(3) of the Act and was
satisfied that it was not reasonable to conclude that the appellant 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 having regard to said
circumstances.
[3]
At the commencement of
the hearing, the appellant's agents argued, on a preliminary basis, that the
Minister's determination was barred or that the assessment period, namely, that
from January 29, 2006, to January 18, 2007, was barred under subsection 52(1)
of the Act. However, this preliminary argument is not found in the Notice of
Appeal filed by the appellant, and the parties were invited to present their
respective arguments to me in writing.
[4]
It is clear from
reading the Notice of Appeal that the limitation period was not raised by the
appellant as an argument which she intended to invoke and that she had not mentioned
it in her allegations of fact. The appellant's argument is based mainly on the
fact that this case is being heard under the informal procedure and hence, the
Court must apply the rules that govern that procedure and grant the appellant
the remedy sought. The appellant argues that the Employment Insurance
Commission did not have, based on the provisions of the Act, the power to
reconsider the assessment beyond the period of 36 months following the period
from January 29, 2006, to January 18, 2007.
[5]
I must first point out
that the first period at issue goes from September 1, 2005, to January 29,
2006, not from January 29, 2006, to January 18, 2007. Second, this is not an
appeal from an assessment issued by the Employment Insurance Commission. This
is an appeal from a determination by the Minister of National Revenue on the
issue of whether the appellant held insurable employment during the periods at
issue. The period of 36 months raised by the appellant's agents, which is set
out in section 52 of the Act, does not apply to the issue of whether
employment is insurable. Section 52 of the Act deals with the Commission's
power to consider any claim for benefits and to make decisions regarding
entitlement to benefits. The appeal before this Court resulted from a
determination by the Minister of National Revenue made under section 90, Part
IV, of the Act.
[6]
Subsection 18.29(1) of
the Tax Court of Canada Act (TCCA) provides that an appeal before the
Court is governed by the informal procedure set out in sections 18.1 to
18.28 of the TCCA. Hence, it is provided in subsection 18.15(3) that the Court
is not bound by any legal or technical rules of evidence when hearing an appeal
under the informal procedure. The SOR/90-690 Regulations of the TCC (TCC Rules
of Procedure respecting the Employment Insurance Act) also set out the
procedure to follow and provide that an appeal may be filed using the form in
Schedule 5. It is clear that the specific format of the notice of appeal does
not matter, but it must contain a summary of the alleged facts that the
appellant intends to establish and the grounds on which the appeal is based. In
my view, the Court has some flexibility but this flexibility cannot apply to the
issue of limitations periods. In such circumstances, a party must state this
ground for appeal in its notice of appeal in order to inform the opposing party
and to prevent it from being taken by surprise or suffering prejudice. It is a
matter of fairness.
[7]
In my opinion, an
appellant must allege in a notice of appeal or revised notice of appeal the grounds
which he or she intends to invoke to put forward his or her position,
especially as to limitation periods.
[8]
Therefore, the only
issue in this case is whether, in the light of all of the facts, the Minister's
determination made under subsection 5(3) of the Act is reasonable. The facts on
which the Minister relied in making his determination are found in
paragraph 6 of the Reply to the Notice of Appeal. The appellant admitted
some of following paragraphs and denied the others as shown below:
(a) The payer has been operating a bar with a capacity for 140
people with 3 Loto Québec slot machines and an apartment-style motel for
about 18 years; (admitted)
(b) The motel comprises 5 rooms and 7 one-bedroom apartments; in
addition, there are 3 one-bedroom apartments and 1 2-bedroom apartment for the
shareholder and the appellant in addition to their St-Georges residence;
(admitted)
(c) The payer's hours of operation were from 8 a.m. to 3 a.m., 7
days per week; (admitted)
(d) The hours of operation were divided into 3 work shifts: 8 a.m.
to noon, noon to 6 p.m. and 6 p.m. to 3 a.m. (admitted)
(e) The payer employed 6 girls, including the manager, in order to cover
the hours of operation; (denied)
(f) The appellant has worked for the payer since the opening of the
bar; (admitted)
(g) The appellant's tasks were to count money for the slot machines,
verify barmaids' cash tills from the day before, prepare bank deposits,
complete reports for Loto Québec, purchase juice, milk and drinks and inventory
the bar, verify the hours worked by the barmaids each week and report them to Desjardins
Payroll Services and clean the bar, namely, floors, windows and bathrooms;
(denied)
(h) When there was a manager working at the same time as the
appellant, the appellant helped the manager; (denied)
(i) The appellant recorded her hours worked at the payer's cash
register from 8 a.m. to noon, while her other hours of work were not recorded;
(admitted)
(j) The appellant worked 40 hours per week; (admitted)
(k) The appellant was paid a fixed weekly salary at minimum wage for
40 hours per week; (admitted)
(l) Even when there was another manager, she was paid the same fixed
weekly salary; (admitted)
(m) The appellant lived in the apartment above the bar, especially
when the sole shareholder of the payer was away, which allowed her to be
available at all times if she was needed at the bar; (denied)
(n) On an unknown date, the payer issued the appellant a record of
employment bearing number A81336764, which stated that her first day of work
was September 1, 2005, and her last day of work was January 29, 2006;
(admitted)
(o) On January 28, 2008, the payer issued the appellant a record of
employment bearing number A84894438, which stated that her first day of work
was January 18, 2007, and her last day of work was January 25, 2008;
(admitted)
(p) On June 28, 2010, the payer issued the appellant a record of
employment bearing number A88362110 stating that her first day of work was January
11, 2010, and her last day of work was June 25, 2010; (admitted)
(q) An analysis of the appellant's work periods compared to those of
the other managers employed by the payer shows a rotation in the hiring of
managers, who are all different, except for the appellant, who returns
regularly; (denied)
(r) During her layoff periods, the appellant remained available to
the payer to help the manager as needed and to continue signing the payer's
cheques and reporting to him the amounts of invoices to be paid, which he paid
online even when he was working elsewhere; (denied)
(s) According to the payer, the appellant has always provided
services to the bar; (admitted)
(t) Starting in September 2006, the payer's sole shareholder worked
for long periods elsewhere; (admitted)
(u) During those periods, the appellant was responsible for the bar.
Yet, during some of these periods, she was not in the appellant's payroll
journal; (denied)
[9]
The role of the Court
with respect to the Minister's determination is to verify that the facts on
which the Minister's assumptions are based are real and were correctly assessed
having regard to the context in which they had occurred, and, after doing so,
the Court must decide whether the conclusion with which the Minister was "satisfied"
still seems reasonable (see Légaré v. Canada, 1999 CanLII 8105 (FCA). The
judge's role was also defined as follows in Perusse v. Canada, 2000
CanLII 15136 (FCA) by the Federal Court of Appeal at paragraph 15:
15. The function of an appellate judge
is thus not simply to consider whether the Minister was right in concluding as
he did based on the factual information which Commission inspectors were able
to obtain and the interpretation he or his officers may have given to it. The
judge's function is to investigate all the facts with the parties and witnesses
called to testify under oath for the first time and to consider whether the
Minister's conclusion, in this new light, still seems "reasonable"
(the word used by Parliament). The Act requires the judge to show some
deference towards the Minister's initial assessment and, as I was saying,
directs him not simply to substitute his own opinion for that of the Minister
when there are no new facts and there is nothing to indicate that the known
facts were misunderstood. However, simply referring to the Minister's
discretion is misleading.
[10]
The question of whether
the appellant performed work is not at issue in this case.
[11]
The appellant and her
spouse acquired a restaurant through a numbered company on September 30, 1991 (Exhibit A-1,
tab 10). At that time, the appellant was the vice-president of that company. The
evidence does not show how the payer became its sole proprietor, other than
that the appellant's spouse is now the sole director. According to the
appellant, she did not invest anything in the company. The company has been in
business since 1991. The appellant was hired by the payer only in 1997. Her tasks
consisted in opening the bar in the morning, cleaning, verifying reports from
the day before and, if there were enough patrons, working in the afternoon. She
placed drink orders, made deposits, got change and, until the motel rooms were
converted into apartments, cleaned the rooms. She said that there was always
something to do, including opening loto-poker machines and preparing reports. According
to her spouse, the motel rooms were converted into apartments in 1995, and the
appellant worked on this. During that entire period, the appellant was not
paid.
[12]
The appellant began to
be paid on September 1, 2005. According to her testimony, she performed
the same tasks as before that date. She was paid for 40 hours of work per
week, but her hours were not recorded except for those in the morning, from 8
a.m. to noon. In the evening, a manager performed the duties that the appellant
performed during the day. The manager did the accounting, recruited barmaids
and was present during the evening. According to the appellant, her spouse
trained the managers, but she also sometimes gave them instructions.
[13]
The work schedules were
prepared by the manager. The manager worked 40 hours or more per week and
was paid per hour like the barmaids. Although there was no control, the hours
were recorded in a payroll journal (Exhibit I-5). It appears from the payroll journal,
however, that, until January 26, 2008, the appellant was the only person who
worked 40 hours per week. It was only on October 26, 2008, that managers
started to be paid for 40 hours per week. This continued until August 7,
2010.
[14]
The appellant, just
like the barmaids, received minimum wage and salary increases coincided with minimum
wage increases. During the periods at issue, the appellant lived in an
apartment above the bar three or four days per week and then went home.
[15]
During the periods at issue,
the appellant's spouse was absent since he was employed as a construction
worker. He was able to work at the bar on weekends for a time, then once per
month and then once every three months. However, he could be reached at all
times. The appellant and her spouse spoke on the telephone every day. She made reports
to him, and sometimes he authorized her to make expenditures. The business's
invoices were paid online by the appellant's spouse. The appellant had a power
of attorney, which allowed her to sign the payer's paycheques and to make
deposits.
[16]
The appellant was laid
off three times between 2005 and 2010. The first time was on January 29, 2006,
that is, five months after she began to be paid. The Record of Employment shows
code A as reason for dismissal but provides no details. She began receiving
employment insurance benefits in March 2006 and finished on December 16, 2006, receiving
all the benefits to which she had been entitled. The reason stated was lack of
work due to the opening of highway 173. Between her layoff and receiving her
benefits, on February 11, 2006, the appellant received, $1,674.81 in vacation
pay corresponding to over 19% of the wages received during that period. No one
has been able to explain the payment of this amount to the appellant.
[17]
On January 18, 2007,
the appellant returned to paid work until January 25, 2008, when she was
again laid off. The Record of Employment indicates that the reason for dismissal
was shortage of work/end of season or contract. At the hearing, the appellant
and her spouse explained that the patron volume had dropped because of the ban
on smoking in public areas. The appellant received all of her employment
insurance benefits by October 18, 2008. She returned to work on January 10,
2010.
[18]
The last period of work
ended on June 20, 2010. At that time, she had accumulated 960 hours and she was
therefore again eligible for employment insurance since the minimum number of
hours is 910. The Record of Employment indicates the same reason for the layoff
as the previous Record of Employment, and the reason stated at the hearing was
that the road to their establishment was closed because of construction work. The
appellant received benefits until the end of September 2010, when the
benefits were suspended and the investigation was launched.
[19]
The appellant performed
duties for the payer even during periods when she received employment insurance
benefits and even during periods when she was not paid. In her first few
interviews with the investigators (Exhibit I-4) and according to the testimony
of Jany Gilbert, the appellant admitted that, in 2008 and 2009, after receiving
all of her benefits, she continued to work for the payer without being paid. The
appellant explained to Ms. Gilbert that, in a business, there are highs and
lows – there are periods when the volume of work and revenues decrease. The
appellant therefore continued to look after the business but, given that it did
not take her very long, she was not paid. She admitted that she had worked in 2009,
but did not know why no record of employment was completed. Finally, she
confirmed that she had worked without income because it was her spouse's
business. However, at the hearing, the appellant denied having made such
statements.
[20]
In her testimony, the
appellant acknowledged that she had performed tasks for the payer during her
periods of unemployment. She explained that the bar had been in operation for
20 years, that it was her place and that she went there regularly. She ran
errands, folded dish towels and did what she called volunteer work. She stated
that other employees also did this. She said that she did this no more then
once per month. In redirect, she returned to the topic and said that she did no
more than 1 hour of volunteer work per week for the payer.
[21]
Her spouse also
acknowledged that the appellant performed some tasks during her periods of
unemployment. Since he was absent during all of the periods at issue, the
appellant sent him the invoices to be paid, which he paid online. She helped him
file his GST and QST reports and ran errands for the bar. In his interview with
Ms. Gilbert, the appellant's spouse acknowledged that, even though the
appellant was not paid during his absences, she still had to ensure the bar's
proper functioning. The appellant's spouse acknowledged that he had given power
of attorney for signing the payer's cheques, including paycheques, only to the
appellant.
[22]
The appeals officer
conducted a fairly detailed analysis of the information she had gathered during
her investigation and from the reports she had consulted. She based her
analysis on the factors set out in paragraph 5(3)(b) of the Act. The
following are her conclusions for each type of factor:
[Translation]
Nature and importance of the work accomplished
The worker's duties consisted in opening the bar in the morning,
from 8 a.m. to noon, Monday to Friday. In addition, she verified daily deposits
made by the barmaids and filled out daily forms for Loto Québec slot machine
reports and the ATM. She also cleaned the bar, made purchases, performed
inventory control, and got change, paycheques, juice, milk, etc.
It is true that these tasks were necessary for the payer's
activities. However, the payer also employed a manager, and the worker
confirmed that, when there was a manager, she did those tasks. We are of the
opinion that, if the worker's job was needed full time during the periods at
issue, it was needed just as much between those periods. In addition, the
worker stated that she had continued to manage the business, but since it did
not take her very long, she was not paid.
It is therefore not reasonable to believe that an arm's-length
person would have worked for the payer in this way.
Duration of employment
The periods of employment have no correlation with the periods of
employment of bar managers.
Since the sole shareholder worked for some periods outside of Quebec,
the worker had to supervise the bar's activities. However, the worker was not
employed by the payer at the end of 2006, while the sole shareholder worked in
Calgary, as well as at the end of 2008, when he was in Ontario; yet, there was
no manager in September and October 2008. She was also employed when the sole
shareholder was not working elsewhere.
The worker did some volunteer work for the payer, for example, in
2009, as she had mentioned to the rulings officer and to the investigator from
Human Resources and Skills Development Canada. The payer had then said the same
thing.
It is not reasonable to believe that an arm's-length person would
have had periods of employment similar to those of the worker.
Conditions of employment
It is true that the worker could stay in an apartment above the bar
and that she could thus go to the bar when she was not on the payroll. She
continued to oversee the bar's operations voluntarily, which an arm's-length
person would not have done regularly.
The worker was always paid for a set number of hours per week
regardless of whether there was a manager. Yet, when there was a manager, the
worker should have had a much lighter workload.
In 2010, the worker was on the payroll for only 6 months, yet, she
took 3 weeks of vacation during that time, for which she was paid by the
payer. In addition, the employer paid her the 4% when she stopped working.
For the first two periods at issue, the worker received all of the
employment insurance benefits to which she was entitled before she was rehired.
In 2010, her Record of Employment indicated 960 hours, while a minimum of 910
is required to be eligible for employment insurance benefits.
It is reasonable to conclude that an arm's-length person would not
have had similar conditions to those granted to the worker.
Compensation
The worker was paid minimum wage when she was on the payroll. However,
unlike other employees, except the manager, she was paid for a set number of
hours of work per week.
In addition, the worker continued to work for the payer without
remuneration between her periods of employment.
The payer and the worker were unable to explain why the Record of Employment
for the period at issue from September 1, 2005, to January 29, 2010, shows $1,674.81
in vacation pay, which corresponds to over 19% of the remuneration paid during
that period.
It is reasonable to conclude that an arm's-length person would not
have been remunerated in this way or worked voluntarily.
[23]
All of the evidence
heard at the hearing of this appeal leads me to conclude that the Minister's determination,
in the circumstances of this case, was reasonable. Although there might be some
differences between the evidence heard and the facts relied on by the Minister,
the fact remains that all of the evidence put forward by the appellant is
insufficient to satisfy me that the determination is unreasonable.
[24]
Related persons are deemed
to be dealing with each other at arm's length when the Minister is satisfied
that, having regard to all the circumstances listed above, 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. It is
therefore possible for related persons to enter into a contract of employment
and to have the employment in question be insurable in accordance with the Act.
It must be ensured that the employer-employee relationship between related
persons is substantially similar to that between arm's-length persons.
[25]
In this case, we have a
business that was purchased by a numbered company, of which the appellant was
the vice-president. Later, there seems to have been a transfer of the title to
the property to the spouse, but the appellant implied in her testimony that the
property had belonged to both of them for 20 years. It is undisputed in view of
the evidence that the appellant had worked there since 1997 without pay and
since 2005 with pay. There is no evidence that the appellant stopped working
during the unpaid periods or that her duties were modified. It is certain that,
starting in 2005, the appellant's spouse was absent from the bar: first, during
the week, and later, during longer and longer periods, up to three months at a
time. However, the appellant communicated daily with her spouse about the
operation of the bar.
[26]
In addition, she was
the only person who could sign paycheques and pay some supplier invoices that
her spouse could not pay online. The appellant tried to downplay her role
during the periods when she received employment insurance benefits, but it
seems rather implausible to me that her role diminished to the point she is
claiming. In my view, the appellant needed to be present at all times to ensure
the proper operation of the business.
[27]
I cannot ignore the
fact that, starting in November 2008, the appellant and another employee were
the only ones who worked 40 hours per week and who did not have to keep track
of their hours. The appellant was also at the bar on weekends, which leads me
to believe that the hours worked were not very important to the appellant. Only
non-arm's-length persons would accept such working conditions. Her hours also
did not change when there was a manager on site.
[28]
It is difficult to
justify the appellant's layoffs given that her spouse was absent most of the
time. The appellant's presence was necessary, and an arm's-length person would
not have accepted such working conditions.
[29]
Overall, the
circumstances of this case and the evidence put forward do not allow me to find
that the Minister made an unreasonable determination.
[30]
The appeal is
dismissed.
Signed at Ottawa, Canada, this 29th day of March 2012.
"François Angers"
Translation certified true
on this th day of September 2012
François Brunet, Revisor
CITATION: 2012
TCC 82
COURT FILE NO.: 2011-1876(EI)
STYLE OF CAUSE: Diane
Jacques and M.N.R.
PLACE OF HEARING: Québec,
Quebec
DATE OF HEARING: October
18, 2011
REASONS FOR
JUDGMENT BY: The Honourable Justice François Angers
DATE OF JUDGMENT: March
29, 2012
APPEARANCES:
|
Agents of the
appellant:
|
Maude Caron-Morin
Maxime Dupuis
|
|
Counsel for the respondent:
|
Emmanuel Jilwan
|
COUNSEL OF RECORD:
For the
appellant:
Name:
Firm:
For the
respondent: Myles J. Kirvan
Deputy
Attorney General of Canada
Ottawa,
Canada
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