Citation: 2008TCC245
Date: 20080430
Docket: 2006-3566(EI)
BETWEEN:
SONIA GIRARD,
Appellant,
and
THE MINISTER OF NATIONAL REVENUE,
Respondent.
[OFFICIAL ENGLISH
TRANSLATION]
REASONS FOR JUDGMENT
Jorré J.
[1]
The issue is whether
the employment of the Appellant, Sonia Girard, was excluded from insurable
employment because she and the payor were not dealing with each other at arm's
length.
[2]
The Appellant argues
that the Minister improperly exercised his discretion under
paragraph 5(3)(b) of the Employment Insurance Act by determining
that it was not reasonable to conclude that she and the business would have
entered into a substantially similar contract of employment if they had been
dealing with each other at arm's length.
[3]
The existence of the
non‑arm's length relationship is not in dispute.
[4]
The periods in issue are
from early or mid‑June to mid‑ or late September each year from
2000 through 2005.
[5]
Testimony was given by
the Appellant, Sylvain Desbiens (her husband) and Louise Dessureault
(Appeals Officer, Canada Revenue Agency).
Facts
[6]
The payor is Sylvain Desbiens,
the owner of Ferme Sylvain Desbiens Enr.
[7]
The payor is in the
business of rearing livestock for meat, growing grain crops and vegetables,
making hay, selling vegetables at a roadside stand on the farm and, in winter,
operating a snow removal service. The farm is located along route 138 in Clermont, Quebec.
[8]
The Appellant began
working at the farm in 1993.
[9]
From mid‑June
until mid‑September, she worked 10 to 11 hours a day, or about
70 hours a week. She did the hoeing and helped with the curing, baling and
removal of the hay.
[10]
From mid‑July
until the end of the season, she worked at the stand on route 138. She
washed the vegetables, tied them in bundles and sold them. She worked about 55
or 60 hours a week at the stand.
[11]
During the time when
the stand was being operated, she spent about one evening a week picking
vegetables. During the second cutting of hay — a period of two or
three weeks, generally in August — she spent about
three hours every evening wrapping the hay after the stand closed.
[12]
The payor did not
record the hours worked by the Appellant in the payroll journal.
[13]
Sylvain Desbiens
testified that a salary of $10 an hour for 55 hours of work, or $550 a
week,
was consistent with market standards. He paid the Appellant the same amount
whether she worked 55 or 70 hours. He said that he could not afford to pay
more than $550 a week.
[14]
The Appellant made two
interest‑free loans to the payor with no repayment terms, for a total of
$35,000. Those loans were made from one spouse to the other and are not
connected with the contract of employment between the Appellant and the payor.
[15]
The Appellant purchased
200 square feet of land in 2004 and allowed Ferme Sylvain Desbiens to
cultivate the land on condition that it pay the property taxes.
Minister's decision
[16]
Louise
Dessureault, Appeals Officer, testified about the Minister's reasons for
concluding that the employment was excluded. Those reasons are part of the
report on an appeal, form CPT110 (Exhibit I‑1).
[17]
The
Minister relied on the following facts:
(a) Terms
and conditions: an unrelated employee would not have agreed to make an interest‑free
$35,000 loan to her employer. Moreover, an unrelated employee would not have
allowed her employer to use her land solely in return for the payment of property
taxes.
(b) Duration of the employment:
[TRANSLATION]
The Appellant's records of employment indicate that she worked for
the payor for 14 weeks a year (16 weeks in 2004), working
60 hours a week in 2005, 55 hours a week in 2004 and 54 hours a
week from 2000 to 2003.
According to the parties, the last day worked was the day the stand
closed, since there were no more vegetables to sell.
The worker's periods of employment coincided with the haying season.
However, it is odd that the hoeing period did not begin until around
June 17 or 20 if the payor sowed around May 10.
Moreover, the number of hours worked each week by the Appellant was
not controlled by the payor.
Thus, according to the records of employment issued to the
Appellant, she worked 60 hours a week in 2005, 55 hours a week in
2004 and 54 hours a week from 2000 to 2003.
In her claims for benefits, the worker stated that she had worked
65 hours a week in 2005, 54 hours a week in 2004, 60 hours a
week in 2002 and 55 hours a week in 2001.
The records of employment issued to the worker also do not reflect
the increase in her working hours during the haying season.
The duration of the employment would have been very different for an
unrelated worker.
(c) Remuneration paid: since the number
of hours varied but the weekly salary was fixed, the hourly earnings varied and
were often less than $10 an hour. [translation]
"An unrelated worker would not accept such a fluctuation in the hourly
rate."
(d) Nature
and importance of the work:
[TRANSLATION]
The worker's work was integrated into the payor's activities.
However, it is strange that the payor's income from the sale of
vegetables made up only 14 percent of all his income for the 2003 and 2004
fiscal years, that is, $11,735 in 2004 and $12,139 in 2003, while the worker
was paid a total of $8,800 in 2004 and $7,700 in 2003, not to mention the payor's
employer costs and operating expenses.
Since the sale of vegetables did not generate much income, it is
unreasonable to think that the payor would have hired an unrelated worker in
the same circumstances.
Analysis
[18]
In Richard Birkland
v. Canada (Minister of National Revenue), 2005 TCC
291, Bowie J. examined the case law
on paragraph 5(3)(b) of the Employment Insurance Act and concluded
as follows at paragraph 4:
This Court's role, as I understand it now, following these
decisions, is to conduct a trial at which both parties may adduce evidence as
to the terms upon which the Appellant was employed, evidence as to the terms
upon which persons at arm's length doing similar work were employed by the same
employer, and evidence relevant to the conditions of employment prevailing in
the industry for the same kind of work at the same time and place. Of course,
there may also be evidence as to the relationship between the Appellant and the
employer. In the light of all that evidence, and the judge's view of the
credibility of the witnesses, this Court must then assess whether the Minister,
if he had had the benefit of all that evidence, could reasonably have failed to
conclude that the employer and a person acting at arm's length would have
entered into a substantially similar contract of employment. That, as I
understand it, is the degree of judicial deference that Parliament's use of the
expression "... if the Minister of National Revenue is satisfied ..."
in paragraph 5(3)(b) accords to the Minister's opinion.
[19]
With
these considerations in mind, I will look at the evidence.
[20]
Both
parties agree that the Appellant worked for the business during the periods in
question. However, after considering the four factors described in
paragraph 17 above, the Respondent concluded that the employment was
excluded. I will look at each of those factors individually.
[21]
Terms and conditions:
although an employee would undoubtedly not have agreed to lend the payor
$35,000 without interest, the Respondent could not explain why this loan must
be considered part of the employment relationship between the Appellant and the
payor. It was simply a case of spouses helping each other out. The Respondent
should not have taken this fact into consideration.
[22]
For similar reasons,
the fact that the Appellant allowed the payor to use the small plot of land
should not have been considered by the Respondent.
[23]
Duration of the
employment: the Respondent attached some importance to the fact that the hours
varied and were not recorded. It is true that the payor did not keep a record
of the Appellant's hours of work, but the payor was in a position to know
whether the work was being done or not and, in this sense, he exercised control
over the Appellant's work.
[24]
In light of the
evidence, I disagree with the Respondent's conclusion that [translation] "[t]he duration of
the employment would have been very different for an unrelated worker".
The work to be done changed during the work period, and it is normal that the
hours of work varied. I do not understand on what basis the Minister could
conclude that unrelated persons would not agree to a work schedule that varied
between 55 and 70 hours a week.
[25]
Remuneration paid: the
number of hours the Appellant worked varied. The evidence shows that she always
worked at least 54 or 55 hours a week when the stand was open and that she
could work many more hours during certain weeks, particularly during the second
hay‑cutting period. Before the stand opened, the Appellant worked about
70 hours a week.
[26]
Since the Appellant had
fixed earnings of $550 a week, the mathematical consequence was that her hourly
earnings varied from week to week. However, is this fact sufficient to conclude
that [translation] "[a]n
unrelated worker would not accept such a fluctuation in the hourly rate"?
The issue may be put a little differently: would an unrelated worker have
agreed to perform work similar to the Appellant's for between 55 and
70 hours a week with a fixed salary of $550?
[27]
Mr. Desbiens
testified that paying a fixed salary of $550 for 55 hours of work was
within the norm and that he would not have paid a third party more. As well, the
evidence does not show that the Respondent relied on a study or other data
about the farm labour market to conclude that an unrelated person would not
have accepted a salary of $550 for a work week of 55 to 70 hours.
[28]
In Théberge v. Canada (Minister of National Revenue), 2002 FCA 123, the situation was
partly similar in terms of the hours and remuneration. The majority decision
was rendered by Décary J.A.,
who wrote:
4 In his reply to the notice of appeal, the
Minister stated that he relied on the following facts, inter alia:
[TRANSLATION]
(a) the payer has operated a dairy and crop farm
since 1959;
(b) his farmland includes approximately
200 cultivated acres (grain, pasture, and hay) and 500 wooded acres;
(c) in 1996, his herd consisted of 46 head, 23
of which were dairy cows;
(d) he also sells wood and maple sugar products;
(e) the Appellant is the son of André Théberge;
(f) the Appellant performed all of the work
involved in operating the farm, including the ploughing, seeding, harvesting,
milking, wood cutting and miscellaneous repairs;
(g) he worked with his brother Carol;
(h) he also took care of the bookkeeping throughout
the year;
(i) in late spring and all summer, the Appellant
worked 40 to 80 hours a week;
(j) for that work, he received a fixed weekly
salary, regardless of the number of hours he worked;
(k) the hours worked were not recorded;
(l) he was usually paid after 2 to 6 weeks;
. . .
7 The judge therefore proceeded to examine the evidence given
before him and concluded that the employment had to be excepted. With respect,
I am of the opinion that this Court must intervene. The judge erred by failing
to consider both the Minister's allegations and the criteria referred to in
paragraph 3(2)(c): the remuneration paid, the terms and conditions,
the duration and the nature and importance of the work performed. He also erred
by considering almost exclusively the duration and the nature and importance of
the work performed outside of the periods of employment at issue.
8 The evidence showed that the applicant actually worked on
the farm throughout his period of employment, that he worked forty to
eighty hours per week as required and his salary was established based on
an average of sixty hours, that the period in question fell within the
active season in agriculture, and that he was paid an hourly wage consistent
with the applicable standards. He was paid that wage after two to
six weeks, but the employer‑father explained this as follows:
A. Well, it's true that the payroll is not necessarily
done every week. When you say six weeks, yes it's true, and I must tell
you at the same time that me too, my pay for milking, if I start milking cows
on September 1, it will be November 15 before I get my first
paycheck. So, I wait six weeks too. You aren't paid every week, every
Thursday evening. We are paid every month and you have to do a month before
getting your paycheque. Also, it takes 15 days to do the payroll. So,
you're producing for six weeks before you get paid.
(Applicant's Record, vol. 1, p. 125)
9 The evidence also showed that the dates when the active
season started and ended varied over the years, and that on an average farm in
the area, the season ran from May 15 to October 15, but that on the
Théberge farm, [translation]
"it's not like that. Here, we start working when the bulk of the work has
started and we finish when ... the bulk of the harvesting is done ..."
(Applicant's record, vol. 1, p. 165). This would explain why the
applicant worked from July 11 to October 1 in 1994; from June 5
to August 28 in 1995; and from June 6 to August 17 in 1996; and
that his brother Carol worked from July 4 to September 24 in 1994;
from June 12 to September 10 in 1995; and from May 20 to
August 24 in 1996.
10 In my opinion, this disposes of paragraphs (i),(j),(k)
and (l) of the Minister's allegations; it cannot reasonably be concluded
from any of those allegations that the employer and employee were not dealing
with each other at arm's length.
[Emphasis added.]
Applying the approach taken by the Federal Court of
Appeal to this aspect of the instant case, I must find that the Minister could
not reasonably conclude from the remuneration paid that a third party would not
have accepted such remuneration.
[29]
Nature and importance
of the work: the Respondent seems to conclude that the payor would not have
paid a third party the same salary because, after that salary was paid, the
income from the sale of vegetables was too low. This conclusion is not
justified for two reasons. First, the evidence shows that part of the
Appellant's work was related to haymaking. The amount of her salary
attributable to the sale of vegetables must therefore be reduced accordingly.
Second, even without this adjustment, it cannot be concluded from either the
facts in evidence or the facts considered by the Minister (i) that the
sale of vegetables was not profitable and that the farm would have been more
profitable if vegetables were not grown, (ii) that the farm would have
been more profitable if the stand were not operated and the vegetables were
sold in some other way, or (iii) that a third party could have been hired
for a lower salary, with the result that growing the vegetables and operating
the stand would have generated a higher profit. Therefore, the Minister could
not reasonably conclude that, [translation]
"[s]ince the sale of vegetables did not generate much
income . . .", the payor would not have entered into a
similar contract with a third party.
Conclusion
[30]
For all these reasons,
I conclude that the Respondent could not reasonably conclude that a third party
would not have accepted remuneration and conditions of employment similar to
those of the Appellant.
[31]
Accordingly, the appeal
is allowed and the Minister's decision is varied to state that the Appellant
held insurable employment during the periods in issue.
Signed at Ottawa, Canada, this
30th day of April 2008.
"Gaston Jorré"
Translation
certified true
on this 27th day
of June 2008.
Brian McCordick,
Translator
Email this Content