Citation: 2009 TCC 285
Date: 20090527
Docket: 2008-1289(EI)
BETWEEN:
PORTES ET FENÊTRES ABRITEK INC.,
Appellant,
and
THE MINISTER OF NATIONAL REVENUE,
Respondent.
[OFFICIAL ENGLISH
TRANSLATION]
REASONS FOR JUDGMENT
Tardif J.
[1]
This is an
appeal concerning the insurability of the work performed. The respondent determined that the work performed for the
appellant, Portes et Fenêtres
Abritek inc. (the appellant), by
Bianca Dupuis from January 1, 2007, to September 10, 2007,
and by her brother Jonathan from January 1, 2007, to
September 7, 2007, was
insurable.
[2]
The legal basis for the
decision is paragraph 5(2)(i) of the Employment Insurance Act (the
Act). Under this provision, work carried out by a person who has a non-arm's length relationship with the
employer within the meaning of the Income Tax Act is not insurable.
[3]
However, Parliament
provided an exception under which the work is insurable if it was performed in
a manner similar and under terms and conditions comparable to those that would
have existed if the parties had had an arm's length relationship. This
exception reads as follows:
5(3)(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]
Thus, if there is no
arm's length relationship, the Minister must analyze the file in more detail
than a simple verification for the presence of the classic conditions, which
are remuneration, the prestation of work and the relationship of subordination.
[5]
He must decide whether
the non-arm's length relationship influenced the performance of work. In other
words, the analysis must consider whether the work in question was carried out
in a manner similar and under conditions comparable to those that would have
existed if the employee and employer had an arm's length relationship.
[6]
This is particular in
another respect. Case law has established that the Tax Court of Canada does not
have jurisdiction to review such a decision when the discretionary power was
exercised correctly and lawfully.
[7]
In other words, when
the discretionary power is exercised responsibly and judiciously, all the
relevant facts were taken into consideration and the conclusion is reasonable,
the Tax Court of Canada cannot amend the decision, even if the Court does not
necessarily agree with it.
[8]
The appellant is
challenging the decision that the work was carried out under an insurable
contract of service. Based on the exception provided for in
paragraph 5(2)(i) of the Act, the respondent had found that the
work in question was not excluded from insurable employment.
[9]
In order to
make and confirm the decision under appeal, the respondent relied on the
following facts:
[Translation]
5. . . .
(a)
The appellant was incorporated on
January 8, 1987. (admitted)
(b)
The appellant operated a business that
manufactured doors and windows. (admitted)
(c)
The appellant operated year-round. (admitted)
(d)
The appellant’s gross annual revenue totalled
approximately $12 million. (admitted)
(e)
The appellant employed about 70 people. (admitted)
(f)
The workers had been employed by the appellant
since 1999. (admitted)
(g)
The female worker was hired as a receptionist,
and later on she was put in charge of the after-sales service. (admitted)
(h)
For the last three years, the female worker had
been the purchasing manager for the appellant. (admitted)
(i)
The female worker’s tasks consisted of ordering
materials, following up on new products, meeting with suppliers, negotiating
prices, creating a price list, and preparing research and development grant
applications. (admitted)
(j)
The female worker also supervised the employee
responsible for the appellant’s after-sales service. (admitted)
(k)
The male worker was hired as a foreman. (admitted)
(l)
The male worker’s task was to ensure that the
production line for PVC products ran smoothly. There were 20 to 30 employees
working on the line. The male worker also supervised the paint room and was in
charge of the building’s maintenance. (admitted)
(m)
The workers accomplished most of their tasks at
the appellant’s place of business. (admitted)
(n)
The workers used the appellant’s materials and
equipment to accomplish their tasks. (denied)
(o)
The female worker’s schedule corresponded to the
appellant’s hours of operation, which were from Monday to Friday, 8 a.m. to 5
p.m. (denied)
(p)
The female worker kept track of her overtime
hours when the task required more than 30 minutes to accomplish. (denied)
(q)
The male worker’s schedule was from Monday to
Thursday, 6:45 a.m. to 5:15 p.m. On Fridays he worked only until noon. (denied)
(r)
On January 17, 2008, the male worker told
the respondent’s representative that occasionally he provided services to the
appellant outside of his working hours for 45 to 60 minutes per
week. (denied)
(s)
The workers took 45 minutes for lunch. (denied)
(t)
The workers worked about 40 hours per week. (denied)
(u)
The appellant kept track of the workers’ hours in
the exact same way as it did for its other employees. (denied)
(v)
The female worker was supervised by Christian
Dupuis. (denied)
(w)
On January 17, 2008, the male worker
told the respondent’s representative that he was supervised by
Jacques Dupuis. (denied)
(x)
The workers asked for the appellant’s approval
in the performance of their tasks. (denied)
(y)
If Christian Dupuis was absent, the female
worker contacted him by e-mail or telephone. (admitted)
(z)
The female worker earned $16.25 per hour, and
after April 2007, $17 per hour. (admitted)
(aa)
The male worker earned $15.50 per hour, and
after April 2007, $16.25 per hour. (admitted)
(bb)
The appellant had a salary chart for various
trade workers, day labourers, operators, the team leader and foreman. (denied)
(cc)
The salary was regularly deposited directly in
the workers’ accounts every week. (admitted)
(dd)
If they had to travel, the workers used the
appellant’s car. (denied)
(ee)
The appellant reimbursed the workers $0.45 per
kilometre if they used their own vehicles. (denied)
(ff)
The workers and all the other employees had
group insurance. (denied)
(gg)
The workers and all the other employees had two
weeks’ vacation during the business’s closure over the Christmas holidays and
two more weeks during its closure in the summer, as well as one more week. (denied)
(hh)
The appellant financially compensated the
employees who did not take that additional week of vacation. (denied)
(ii)
On January 17, 2008, the male worker
told the respondent’s representative that he had not taken the additional week
and that he had been paid accordingly. (denied)
(jj)
The appellant had a right of control over the
workers and it exercised it. (denied)
6. . . .
(a)
The appellant’s sole shareholder is Christian
Dupuis. (admitted)
(b)
Christian Dupuis is the workers’ father. (admitted)
(c)
The workers are blood relatives of a person who
controls the appellant. (admitted)
7. . . .
(a)
The workers’ salaries were decided and governed
by the appellant. (admitted)
(b)
The labour market information provided by Emploi
Québec indicated that in the lower pay bracket, the hourly pay of $18 to $19.99
is appropriate for a purchasing manager with a bachelor’s degree or college
diploma in the Chaudières-Appalaches region. (admitted)
(c)
The female worker had a secondary school
diploma. (admitted)
(d)
The female worker had been trained on the job.
(admitted)
(e)
The female worker’s pay of $17 per hour was
reasonable for her education level. (denied)
(f)
The labour market information provided by Emploi
Québec indicated an annual salary of $40,000 for a foreman with a secondary
school diploma in the Chaudières-Appalaches region. (admitted)
(g)
The male worker had no secondary school diploma.
(admitted)
(h)
The male worker’s pay of $16.25 per hour was
reasonable for his education level. (denied)
(i)
The female worker’s annual pay of $34,758 placed
her among the highest paid employees of the appellant. (denied)
(j)
The male worker’s annual pay of $34,875 placed
him among the highest paid employees of the appellant. (denied)
(k)
The workers had been working for the appellant
for several years. (admitted)
(l)
The workers worked for the appellant all
year-round. (admitted)
(m)
The duration of the workers’ work was
reasonable. (denied)
(n)
The workers had the same work conditions as the
rest of the appellant’s employees. (denied)
(o)
The workers’ work was essential and important
for the smooth operation of the appellant’s business. (admitted)
(p)
On January 16, 2008, the female worker
told the respondent’s representative that if she had to leave the company, she
would have to be replaced. (denied)
(q)
The terms and conditions, the nature and the importance
of the workers’ work were reasonable. (denied)
[10]
Several of the facts
were admitted, while some were denied. This was indicated by the words in bold
at the end of each statement.
[11]
Josée Bilodeau, the
spouse of the sole shareholder, Christian Dupuis, and Bianca and Jonathan’s
mother, described the business. She explained that her spouse was diagnosed
with a very serious degenerative illness in 2006. This illness was gradually
reducing his mobility and physical autonomy, to the point of making him unable
to leave his home.
[12]
At the time of the
interviews on which the decision was based, Christian Dupuis was convalescing.
His health had deteriorated so much that his spouse and their children, Bianca
and Jonathan, had to split up all the numerous and important tasks that he had
performed before the terrible diagnosis.
[13]
Ms.
Bilodeau described the work performed by Bianca and Jonathan and explained how
their workloads gradually expanded as more tasks were added.
[14]
Both
workers began their employment with the company at a very young age. They
learned very quickly and became accustomed to the necessity of accepting
numerous important tasks. As a result, they are now in charge of their
respective sectors.
[15]
Very
motivated and enthusiastic, they showed a great deal of interest and
determination in learning their trade despite their young age.
[16]
As for
compensation, Ms. Bilodeau explained that her children were paid on an hourly
basis. The salary issue was the most significant and detailed component of the
evidence. In fact, it was undoubtedly the most important aspect of the appeal.
[17]
The
evidence showed some discrepancies between the facts noted at the time of the
telephone conversation held during the investigation and Ms. Bilodeau's and
Bianca's testimonies.
[18]
Ms.
Bilodeau, who was very much involved in managing the company in which her
spouse owned all the shares, provided a number of details in order to explain
Bianca and Jonathan's exceptional contribution.
[19]
She also
explained that their business experienced very significant growth every year
and that Bianca and Jonathan played an important role in this growth.
[20]
As for each
worker's tasks, she stated that each was in charge of his or her sector,
namely, production in Jonathan's case and after-sales service and purchasing in
Bianca's. In regard to wages, a scale indicating the salaries in the
field was filed in evidence.
[21]
It was
explained that Jonathan's and Bianca's wages were generally sufficiently
consistent with the scales, but also similar to the wages of those who held or
had held comparable positions.
[22]
Ms. Munger,
who was responsible for the file on behalf of the respondent, also testified.
She explained how the telephone conversation had unfolded and noted the various
facts collected. Her testimony brought to light two particular elements.
[23]
First, she
did not ask any questions about the convalescence. Second, the information
obtained during the investigation indicated that much fewer hours had been
worked outside regular working hours than was claimed at the hearing.
[24]
As for the
wages, the data was the same, except that Ms. Munger made some comparisons with
the available scales indicating salaries based on education and experience.
[25]
Is there an
untrue version that the Court must discard? I do not believe so,
because these are not contradictions. Rather, it is a question of time and
context, resulting from reflection and practical preparation for the hearing.
It is important to note that the telephone
conversation took place in January 2008, while the hearing was held on April
16, 2009.
[26]
Young
Bianca is an enthusiastic, intelligent, mature and very responsible young
woman. She quickly understood the gravity of the situation that her parents had
found themselves in after the terrible diagnosis.
[27]
The evidence
demonstrated that Bianca was dynamic and that she had understood that her
future lay with the company her father had established. Conscious of the
situation, she did not want to burn any bridges and was ready to fully dedicate
herself to the development of the business, which was clearly well managed.
[28]
The
evidence showed that those responsible for the file conducted a serious and
responsible investigation and analysis. The relevant facts were
considered, and the conclusion was reasonable.
[29]
The case
seemed special to me because of its context. The terrible illness of the
appellant's sole shareholder evidently upset not only the daily life but also
the entire existence of this young family.
[30]
At the time
of the interview, Ms. Munger did not ask Christian Dupuis's spouse about the
cause and the duration of his convalescence or about the consequences of the
illness.
[31]
For her
part, Ms. Bilodeau did not seem to insist on that situation. I think it
important at this point to hazard an explanation. Mr. Dupuis had known for only
a short time about the seriousness of the state of his health, and his physical
capacity was evidently better than it was in April 2009.
[32]
More
restricted physically, but able to supervise the management of his business, he
realized that his spouse and children would have to play an increasingly
important role following the gradual deterioration of his physical capacity.
[33]
In
addition, discussions, conversations and the various changes that would
eventually have to be put in place were brought up. This would result in
several changes of various kinds, and Bianca and Jonathan would be called upon
to meet greater challenges.
[34]
The
appellant's counsel clearly wanted to emphasize that particular aspect. I have no doubt
that the family situation has had an effect on Bianca's and Jonathan's
contracts of employment, but the evidence demonstrated no significant changes
to the three essential elements of their contracts of employment for the
periods in question.
[35]
The
differences between what was said during the investigation and during the
hearing were due to the passage of time. It is evident that during the hearing
Ms. Bilodeau and Bianca were thinking of today's situation and not the one
that they had been in during the periods in question. This is easily explained
and justified without undermining their credibility by Mr. Dupuis's illness,
which is becoming increasingly restrictive.
[36]
The
workload and pay, two very important elements, do not support the appellant's
position. Admittedly, the workers had a very heavy workload for their age and
experience, but the wages they received corresponded to the market standards
according to the scales, and also to the salary paid at one point to an uncle
and to another brother of their father.
[37]
In fact, if
we take into account the age, education, seniority, and the wages suggested by
the scale as well as the wages paid to an executive with an arm's length
relationship to the company, Bianca and Jonathan's salaries were not so
unreasonable as to make the decision under appeal absolutely inappropriate or
unreasonable.
[38]
The
appellant stressed the very particular context resulting from the illness of
the father, whose health is predicted to continue deteriorating. Evidently, the
situation will change, and one day, Bianca and Jonathan's contracts of
employment may be significantly altered. However,
during the period at issue, that situation had not developed to the extent that
it rendered unreasonable the finding under appeal.
[39]
The
evidence on the record disclosed two components: the contract of employment and
the family situation. Of course, it is difficult to isolate the two components,
especially during such a difficult time.
[40]
However, in
relation to the contract of employment, the finding made was reasonable on the
balance of probabilities, at least for the periods at issue. The decision
deals with that period, and I do not doubt that one day the situation may need
to be reassessed.
[41]
In this case, the
decision concerns the periods at issue, and in regard to that, it has been
shown on the balance of probabilities that the assessment was made correctly
and in accordance with accepted practices. The conclusion that was based on it
is entirely reasonable in the circumstances of the period in question.
[42]
The appeal is
dismissed.
Signed at Ottawa, Canada,
this 27th day of May 2009.
“Alain Tardif”
on this 9th day of
July 2009
Margarita
Gorbounova, Translator
Email this Content