Citation: 2012 TCC 145
Date: 20120605
Dockets: 2011-2718(EI),
2011-2719(EI)
BETWEEN:
ODETTE BOUCHARD,
FORAGE VAL-BRILLANT INC.
AND SERGE FOURNIER,
Appellants,
and
THE MINISTER OF NATIONAL REVENUE,
Respondent.
[OFFICIAL ENGLISH
TRANSLATION]
REASONS FOR JUDGMENT
Angers J.
[1]
These appeals were
heard on common evidence and concern a decision of the Minister of National
Revenue (the Minister) that appellant Odette Bouchard did not hold insurable
employment from June 1 to August 22, 2010, and from September 13 to November 7,
2010, when she worked for appellant Forage Val-Brillant Inc. (the payer). The
Minister established that the appellant and the payer were not dealing with each other at arm's length in
the context of this employment
and that it was not reasonable to conclude, having regard to the circumstances,
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.
[2]
It was admitted that
the appellant and payer are related within the meaning of the Income Tax Act. Serge Fournier is the husband of the
appellant and the sole shareholder of the payer. The Minister relied on the following assumptions of fact:
[Translation]
(a) The appellant was incorporated on July 8, 2004; (admitted)
(b) The appellant operated a company specializing in all types
of well drilling; (admitted)
(c) The sole shareholder of the appellant worked full-time for
Béton Provincial, Monday to Friday from 7:00 a.m. to 4:00 p.m.; (denied)
(d) From 2004 to 2009, the appellant did not have any business
activity; (denied)
(e) While there was no business activity, the worker prepared
the appellant's tax returns and issued the same, monthly response that no
government remittance would be made; (admitted)
(f) The worker spent about 2 weeks preparing the appellant's tax
returns and was not paid for such work; (denied)
(g) In 2010, the appellant obtained a contract with Marzcorp Oil
and Gas to clean a 480-foot well; (denied)
(h) In 2010, the appellant only had the one contract that
brought in $128,500; (denied)
(i) The job site for the contract was in the woods accessible
by a logging road. No telephone or radio communications were possible; (denied)
(j) To perform the contract, the appellant had a loader,
welders, a lift truck, generator and 2 trailers; (denied)
(k) To perform the contract, the appellant hired 4 employees, i.e.
a foreman, Régis Sirois, 2 welders, Réjean Sirois and William Angell and the
worker; (admitted)
(l) Bernard Gagnon, shareholder of Marzcorp Oil and Gas Inc., went
to the job site almost every day and in the evening stopped at the home of
Serge Fournier to talk about the work being done; (denied)
(m) The offices of the appellant were located in the
shareholder’s home and that of the worker; (admitted)
(n) Before working for the appellant during the periods at
issue, the worker was unemployed; (admitted)
(o) The worker's duties mainly involved bookkeeping as she had
to prepare invoices, the payroll, government remittances, records of employment,
T4 slips, month-ends and bank deposits. She also occasionally had to purchase
parts and deal with 2 suppliers of leased equipment and prepare progress
reports every 2 weeks at the request of the appellant's client; (denied)
(p) All the decisions were made by the appellant's sole
shareholder; (admitted)
(q) The worker's hours of work were 5 or 6 hours a day until
4:00 p.m. as well as nights and weekends, as needed; (denied)
(r) The worker worked 8 hours a day and at least 5 days a week; (denied)
(s) The hours worked by the worker and by the other employees of
the appellant were not recorded in a register; (admitted)
(t) The worker was always paid for 50 hours of work per week
regardless of the number of hours she actually worked; (admitted)
(u) In fact, the appellant respected the rules established by
the Commission des normes du travail by paying its employees their regular
salary for 40 hours of work and time and a half for overtime; (admitted)
(v) This way of proceeding meant the worker earned $16.50 per
hour because she always received the same amount, i.e. $907.50 plus 4% vacation
pay, which for the first work period had been paid at the end of the period,
while for the second, the 4% vacation pay had been paid on each pay cheque; (admitted)
(w) The appellant hired workers at different times in 2010, as
follows: (admitted)
|
|
June
|
July
|
August
|
September
|
October
|
November
|
|
Worker
|
X
|
X
|
Ended on August 22
|
Began on the 13th
|
X
|
Ended on the 7th
|
|
Réjean Sirois
|
August 1 to August 27
|
Began on the 21st
|
Ended on the 1st
|
Began on the 13th
|
X
|
Ended on the 14th
|
|
Régis Sirois
|
X
|
X
|
Ended on the 1st
|
Began on the 13th
|
Ended on the 10th
|
N/A
|
|
William Angell
|
X
|
Ended the 22nd
|
N/A
|
N/A
|
N/A
|
N/A
|
(x) During the three-week period from August 1 to August 22,
2010, the worker continued working for the appellant despite the fact that the appellant
had shut down the job site on August 1; (admitted)
(y) To qualify for employment insurance, the worker need 910
hours of insurable work; (admitted)
(z) The
periods at issue total exactly 20 weeks of employment; (denied)
(aa) If the appellant had considered the worker to have worked 40
hours per week for 20 weeks, the worker would not have qualified for employment
insurance benefits; (denied)
(bb) The worker was routinely paid for 10 hours of overtime each
week; (admitted)
(cc) On August 25, 2010, the appellant gave the worker a record of
employment indicating her first day of work as June 1, 2010, and her last day
as August 22, 2010. The number of insurable hours was 580 and she was paid
$10,989.60; (admitted)
(dd) On November 18, 2010, the appellant gave the worker a record
of employment indicating her first day of work as September 13, 2010 and her
last day as November 7, 2010. The number of insurable hours was 400 and she was
paid $7,550.40; (admitted)
(ee) The worker's records of employment do not correspond to the
appellant's operating needs or to reality in terms of the first period of work
and the number of hours actually worked; (denied)
[3]
Serge Fournier has
worked for Béton Provincial for 22 years. As a resident of Ste-Paule, he must
travel to Matane, Québec, where his employer's plant is located. His work hours
are from 6:00 a.m. to 4:00 p.m. and it is nearly impossible to reach him while
he is at work. He is also the shareholder of the payer.
[4]
The payer obtained a
contract in 2004 and did not secure another one until 2010. On April 30, 2010,
the payer entered into an agreement with Marzcorp Oil & Gas Inc. (Marzcorp)
to perform cleaning and assessment work of a well 4,700 feet deep, and not 480
feet deep as assumed by the Minister in paragraph (g). The cost of the work was
$552,003.90. The written agreement was only signed by the payer.
[5]
Since Mr. Fournier
worked full-time, the payer needed someone to handle administrative matters for
the business. Since the appellant holds an administrative technician
certificate and since she had already done this work for the payer in 2004, she
was the right person for the job. Her job description is included in Exhibit
A-3 but suffice it say that she had to be at work 40 hours per week and had to
work nights and weekends, as needed. She was the receptionist and had to be the
liaison between the workers on the job site and the payer as well as handle all
the accounting (statements, deposits, etc.) She performed this work from an
office in the home she shared with Mr. Fournier. She also had to meet with the
Marzcorp representative every day.
[6]
To perform the work,
the payer hired a foreman and two other general labourers. The foreman was paid
$20 per hour for 60 hours per week and the two men received $14.50 per hour for
72 hours per week. However, they were paid overtime for hours worked in excess
of 40 per week. The well in question was in a remote location and the employees
stayed on site in trailers. They did not have to keep track of their work hours
and were paid on a regular basis.
[7]
For her part, the
appellant, like the other employees, did not have to keep track of her work
hours. She was paid $16 per hour for 40 hours and received time and half for 10
hours of overtime per week. This was therefore the case for all the employees.
In the case of the appellant, she was paid for 50 hours per week regardless of
the hours worked. The payer stated it followed the same method as its employer
Béton Provincial.
[8]
The work began in early
June 2010. The scope of the work is apparent from the photos filed as evidence.
Under the agreement, Marzcorp was to pay the sum of $276,001.95, i.e. half of
the total cost of the work, but did not do so. Still, the payer began the work
and the payments from Marzcorp were slow in coming or were only small amounts. In
light of the foregoing, the payer decided to stop the work at the end of July
and to lay off its employees. However, the appellant continued to work for
three weeks to complete her administrative work and especially to continue her
efforts to get paid by Marzcorp. She was laid off three weeks later on August
22, 2010, and the payer removed the equipment from the job site.
[9]
In mid-September, the
Marzcorp representatives convinced the payer to resume the work. They therefore
paid out funds; the job site was re-opened and the employees were brought back
to work. The situation did not last. The payer continued to have difficulty
getting paid and decided to terminate the contract. The job site was shut down
and everyone left the premises. The appellant left her job on November 7 and on
November 14, 2010, the last employee left.
[10]
The appellant received
two records of employment indicating a total of 980 hours of work. Had the
payer not terminated his contract with Marzcorp, the appellant would have
worked much longer.
[11]
The payer received $128,500
from Marzcorp for his work. It sued Marzcorp for the balance of $140,000.
[12]
The appellant described
her duties, which were primarily managerial rather than merely clerical. She
handled everything; more specifically, she was the liaison between the payer
and the Marzcorp representative. Her hours of work were from 7:00 a.m. to 4:00
p.m. and sometimes a few hours later. The payer set her hours of work at 50 per
week and the appellant was happy because it compensated her for the unpaid
hours she spent each year preparing the payer's income tax returns and handling
other small administrative tasks. In the case of the payer, this had nothing to
do with the established work hours.
[13]
What the appeals
officer noticed was that when the employees were laid off at the end of July,
the appellant stayed on the job for three additional weeks before she was laid
off, such that her work hours did not correspond to the other workers'.
[14]
The appeals officer
also stated in his report that the payer's agreement with Marzcorp had not been
signed by the latter, which suggests that the agreement was not valid and that
the labour costs planned by the payer did not include a general secretary
position. He also noted that the appellant worked for the payer without being
paid at other times besides the period at issue, i.e. for about two weeks per
year. He concluded that the payer and the appellant had decided to compensate
the unpaid work, which would explain why she was paid for 50 hours per week. He
also concluded that while the hourly rate was below average, the appellant
earned $47,000 during the year, which is higher than the $32,000 usually paid
for comparable work according to the Institut de la statistique du Québec.
[15]
The role of the Court
with regards to the Minister's decision is to verify whether the facts on which
the Minister based his assumptions are true and whether they were weighed
correctly taking into account the context in which they occurred and following
such verification, the Court must decide whether the conclusion of which the
Minister was "convinced" still seems reasonable (see Légaré v.
Canada, 1999 CanLII 8105 (FCA)). The role of the judge was also defined by
the Federal Court of Appeal in Pérusse v. Canada, 2000 CanLII 15136, at
paragraph 15, which reads as follows:
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.
[16]
I would first like to point
out that the credibility of the appellant and her husband are not at issue.
Both testified honestly and presented the facts without qualification.
[17]
Since the payer had
obtained a contract with Marzcorp, it had to fulfill the obligations to which
he had agreed. Besides the employees on the job site, the payer needed a
manager to handle administrative matters. Mr. Fournier, the appellant's
husband, is the sole shareholder of the payer, and by his own admission, unable
to handle paperwork and needed the services of someone who could take care of
this aspect of the business. Moreover, he worked full-time, which made him
difficult to reach. He therefore hired the appellant, who was clearly
qualified to perform such work. According to the payer, it would have needed
two employees to replace the appellant. Given the appellant's managerial skills
and the fact that her work was administrative in nature, the importance of her
work is obvious.
[18]
The appellant was paid
$16 per hour for her services. The appeals officer admitted at the hearing that
this hourly rate was below average according to the Institut de la statistique
du Québec. However, he said that since the appellant worked 50 hours per week,
her salary was much higher than the usual pay for comparable work. This is obviously
explained by the additional 10 hours of work per week for which she was paid. While
it is true that these 50 hours per week may be suspect, in the circumstances, Mr.
Fournier explained the working conditions and those of the workers with whom he
was dealing with at arm's length. It must also be recognized that the payer's
other employees had similar working conditions and that ultimately none of the
employees kept track of their hours of work. It was estimated that the
appellant worked 50 hours per week and that the other two employees worked 60
and 72 hours, respectively, at the regular rate for 40 hours and at time and a
half for overtime. In the circumstances, the fact that the appellant worked 50
hours per week becomes less questionable.
[19]
I accept the
appellant's explanation when she testified that the 10 hours of overtime per
week were not intended to compensate her for the unpaid work she performed at
other times besides the period at issue. For her, it was a form of
compensation, but that really was not the case. In fact, Mr. Fournier was very
clear on this matter. The work performed at other times involved preparing the
corporation's tax return and annual return; these tasks did not require two
weeks' work as the appeals officer concluded. The appellant performed this work
on a volunteer basis.
[20]
In his analysis, the
appeals officer also concluded that the 50 hours per week for which the
appellant was paid entitled her to employment insurance. She worked for 980
hours and needed 910 hours to be entitled to employment insurance. If she had
been paid for 40 hours per week, she would not have been entitled. In my view,
what the appeals officer failed to take into account was that the payer had to
terminate the contract for non-payment midway through the work and that if the
situation had been different, the appellant would not have been laid off
because the contract work was not completed. It is therefore wrong to conclude that
the duration of the appellant's employment was intended to allow her to collect
employment insurance.
[21]
The appeals officer
prepared a table indicating the payer's income as well as the salaries paid to
show that the appellant's work did not require 50 hours per week. In my view,
it is difficult to draw a connection between the payer's income and the
salaries paid. It must be remembered that in the case at bar, the payer was
having trouble getting paid and that it still had to pay its employees in the
hope that Marzcorp would respect its obligations. It must also be remembered
that the appeals officer assumed that the payer's contract with Marzcorp was
not valid because the latter had not signed it. He therefore placed little
importance on the contract and seemed to compare the payer's income to sales
revenue.
[22]
In my view, the appeals
officer minimized the scope of the payer's contract with Marzcorp. There was much
more job site equipment than he thought and the contract was for $552,003.90
and not $128,500, as indicated in paragraph (h) of the assumptions of fact. The
depth of the well was 4,700 feet and not 480 feet as indicated in paragraph (g).
[23]
After considering the
testimonies of the payer and the appellant as well as the facts established
during the hearing, I conclude, with deference, that the decision of the
Minister in the case at bar was not reasonable. The terms of said employment,
its duration, remuneration, nature and importance are such that it is
reasonable to conclude that similar conditions would have existed between two
arm's length parties. The appeal is allowed.
Signed at Ottawa, Canada, this 5th day of June 2012.
"François Angers"
Translation certified true
on this 10th day
of August 2012.
Daniela Possamai, Reviser
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