Citation: 2011 TCC 454
Date: 20110927
Docket: 2009-982(EI)
BETWEEN:
JEANNINE CROISETIÈRE,
Appellant,
and
THE MINISTER OF NATIONAL REVENUE,
Respondent,
and
GMO ASPHALTES INC.,
Intervenor.
[OFFICIAL
ENGLISH TRANSLATION]
REASONS FOR JUDGMENT
Jorré J.
[1]
The appellant, Jeannine
Croisetière, is appealing from a decision of the Minister of National Revenue
(Minister) dated March 26, 2009, in which he found that the appellant did not hold insurable employment during
the period from June 23 to
October 3, 2008.
[2]
The appellant and the payor,
GMO Asphaltes Inc., are not dealing with each other at arm’s length, and
accordingly, paragraph 5(2)(i) of the Employment Insurance Act (EIA)
applies. The Minister arrived at the conclusion “that a substantially similar contract of employment would
not have been entered into if the
employee and the employer had been
dealing with each other at arm's length” with the consequence that the employment was not insurable.
[3]
The relevant provisions
are paragraph 5(2)(i) and subsection 5(3) of the EIA:
(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),
(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.
[4]
The existence of a
non-arm’s length relationship is not being challenged. The appellant is married
to the payor’s sole shareholder, Gabriel Gervais.
[5]
The appellant and the
intervenor are, however, contesting the decision as to the application of
subsection 5(3) of the EIA.
[6]
The payor operated a
seasonal asphalt paving, sealing and excavation business. The business was active
from mid-April to mid‑November. During that period, the payor hired two
employees.
[7]
The payor used the
family residence as an office.
[8]
Prior to being entered
into the payroll journal in June 2008, the appellant testified that she began carrying
out her duties for the payor as of April 2008.
[9]
She volunteered some 20
hours per week prior to being hired. She did the accounting, including the bookkeeping,
payments, invoicing and deposits. She would also meet with the accountant, especially
in the beginning, because since she had not done any accounting in years, she
needed to get back up to speed.
[10]
The appellant was hired
on June 23, 2008, as a billing clerk. In addition to the bookkeeping, she sought
out contracts door to door and sometimes did manual work.
[11]
She and her husband stated
that her change in status was caused by the addition of new duties.
[12]
Her remuneration was
set at $600 per week, that is, $15 per hour, and was paid to her on a
weekly basis by cheque. It is the appellant’s husband who decided on the
appellant’s remuneration.
[13]
She entered 40 hours of
work per week in the payroll journal. Although the appellant worked overtime, she
did not enter and was not compensated for her overtime.
[14]
The appellant testified
that she spent approximately 20 hours per week, mainly in the morning, doing
accounting work. Toward the end of the day, she would go from door to door to
seek out work for two or three hours. Finally, she on occasion did manual
work involving sealing: cleaning, the repair of cracks and the application of
sealer.
[15]
She was dismissed on
October 3, 2008, for lack of work.
[16]
After her layoff the
appellant continued to perform services for the payor, albeit less frequently; inter
alia, the appellant testified that she continued to be in charge of the
payor’s bookkeeping for about two to five hours per week.
[17]
The appellant’s husband,
Mr. Gervais, submitted that the appellant only helped him in April and May.
Subsequently, according to Mr. Gervais, owing to the inclement weather conditions,
he had to go back to doing sealing work. It was at that moment when his wife
proposed to work for the company.
[18]
Mr. Gervais’s response
was as follows:
[Translation]
Accumulate your hours and as of the month of June, if I have my
contracts, I said, I will hire you again. I will have only one employee, only
you as we will take care of the other business together.
[19]
Mr. Gervais testified
that the appellant worked 70 hours per week and that he could not have
hired anyone else to do the same work even if he offered a salary of $1,000 per
week.
[20]
The appellant’s paycheque
of October 9, 2008, was deposited into the company’s account and not into the
joint account of the appellant and her husband where the appellant’s other
paycheques were deposited. The cheque of October 9, 2008, was deposited into
the company’s account probably because the company needed money.
[21]
From May to November 2008,
there were approximately 250 entries for payments and deposits in the company’s
books. The number of monthly entries varied from about 45 to a little over 80.
[22]
While I accept that the
appellant worked beyond the 40 hours per week paid to her, I am not satisfied
with the testimony of Mr. Gervais that the appellant worked 70 hours
every week; however, I can accept that the appellant worked 70 hours over
the course of certain weeks.
[23]
Nevertheless, even if I
conclude that the appellant probably spent a little more time doing the
accounting in the beginning when she had to consult with the accountant more
often and get back to speed on accounting, and that therefore the average of 20 hours
per week until October 3, 2008, corresponded to a little more than 20 hours
toward the beginning of the period and to a little less than 20 hours toward
the end, I cannot accept that in October and in November the accounting work only
represented two to five hours per week, as the number of entries to be made in
October and in November was still greater than half of the number of entries
made in the two months where the most entries were made, that is, in August and
in September. There is nothing that would allow me to conclude that in October and
in November the entries could have been made much sooner than that.
[24]
I also accept that Mr. Gervais
would not have been able, even if he had paid more, to find another employee to
do the same work as the appellant considering the availability and flexibility
of the appellant.
[25]
Would a substantially similar contract of employment have
been entered into if the
employee and the payor had been dealing
with each other at arm's length?
[26]
I must regretfully
conclude that a substantially similar
contract of employment would not
have been entered into had there not been
a non-arm’s length relationship.
I reach this conclusion, inter alia, owing to the following elements:
(a) During
the salaried employment period, there were a significant number of unpaid hours
of work.
(b) Mr. Gervais recognized
that he could not have hired another person to do the same work as the appellant
at the salary that was being paid to her. (This is the factor to which I attribute
the greatest importance.)
(c) On one occasion, when
the company lacked funds a shortage of capital, the appellant deposited her paycheque
into the company’s account. (This is a minor factor.)
(d) A significant amount
of volunteer work was done before and after the employment period.
Overall, such elements are incompatible with a contract
that would have been entered into with an unrelated person.
[27]
Consequently, the Minister’s
conclusion is reasonable and the appeal is dismissed.
Signed at Ottawa, Canada, this 27th day of September 2011.
“Gaston Jorré”
Translation certified true
on this 14th day
of November 2011.
Daniela Possamai,
Translator
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