Citation: 2008TCC134
Date: 20080310
Docket: 2006-3710(EI)
BETWEEN:
NICOLE VANASSE,
Appellant,
and
THE MINISTER OF NATIONAL REVENUE,
Respondent.
[OFFICIAL ENGLISH
TRANSLATION]
REASONS FOR JUDGMENT
Paris J.
[1] The appeal is from
a decision by the Minister of National Revenue (the "Minister") under
the Employment Insurance Act (the "Act") dated October 27, 2006,
that the employment of the Appellant with 9058‑5399 Québec Inc.
(the "Payor") was excluded employment under paragraph 5(2)(i) of
the Act for the following periods:
December 6, 1999, to March 31, 2000
December 11, 2000, to April 6, 2001
December 24, 2001, to April 19, 2002
December 23, 2002, to April 18, 2003
December 22, 2003, to April 30, 2004
December 13, 2004, to May 6, 2005
[2] Paragraph 5(2)(i)
of the Act states that insurable employment does not include "employment
if the employer and employee are not dealing with each other at arm's
length". The fact that the Appellant and the Payor were not dealing
with each other at arm's length was not disputed.
[3] However, in
applying paragraph 5(2)(i), the Minister may consider the exception
provided for under paragraph 5(3)(b) of the Act, which reads as follows:
5(3) For the purposes of paragraph
(2)(i),
…..
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] In this case, the
Minister determined that it was not reasonable to conclude that the Appellant
and Payor would have entered into a substantially similar contract if they had
been dealing with each other at arm's length.
[5] The assumptions of
fact on which the Minister relied in making the determination are set out in
paragraph 7 of the Reply to the Notice of Appeal. Counsel for the Appellant admitted
most of those facts, as follows:
[TRANSLATION]
(a)
the Payor was incorporated on December 22, 1997,
but the business had been in operation since 1988; (admitted)
(b)
the Payor ran a bar and function room operating
as "Le relais de la station"; (admitted)
(c)
the Payor is open throughout the year, but the
busiest season is from December to April, because of snowmobiler clientele; (admitted)
(d)
the Payor's hours of operation in the winter and
on Saturdays and Sundays year-round were 10 a.m. to 11 p.m.; on the other days,
the business was open from 4 p.m. to 11 p.m.; (admitted with
explanation)
(e)
the Payor's gross income and losses were as
follows:
|
Year
|
Income
|
Losses
|
|
1999
|
$144,236
|
-$34,318
|
|
2000
|
$149,956
|
-$34,506
|
|
2001
|
$164,497
|
-$39,144
|
|
2002
|
n/a
|
- $758
|
|
2003
|
$157,058
|
-$11,463
(admitted)
|
(f)
according to the Payor's 2001 to 2005 quarterly
GST returns, sales ranged between $22,451, the lowest, in the fall of 2003, to
$54,070, the highest, in the winter of 2005; (admitted)
(g)
the Appellant worked as a manager for the Payor;
(admitted)
(h)
the Appellant's duties consisted in scheduling
the servers' hours of work and supervising the servers, doing inventory, doing
the ordering and running errands, doing the cleaning, and handling the
bookkeeping, payroll and bank deposits; (admitted with explanation)
(i)
the Appellant had authorization to sign the Payor's cheques on her own; (admitted)
(j)
the Appellant had worked for the business for 15 years; (admitted)
(k) Jacques
Vanasse had a full-time job with another business and put in time with the Payor
when he could; (admitted)
(l)
in a signed statement to a representative of Human Resources
Development Canada on August 24, 2005, the Appellant indicated
that [TRANSLATION] "I generally work 40 hours a week over five days, from
Monday to Friday"; (admitted)
(m) on August 30, 2005, Jacques Vanasse told a representative of the Respondent
that the Appellant often worked more than 40 hours a week; (admitted)
(n)
the Appellant was paid $450 a week into 2002 and
$475 thereafter; (admitted)
(o)
the Appellant was paid only during the winter
months; (admitted)
(p) on
April 5, 2000, the Payor issued the Appellant a record of employment that
showed the first day of work as December 6, 1999, the last day of work as March 31,
2000, the number of insurable hours as 680, and insurable earnings as $7,956; (admitted)
(q) on
April 11, 2001, the Payor issued the Appellant a record of employment that
showed the first day of work as December 11, 2000, the last day of work as
April 6, 2001, the number of insurable hours as 680, and insurable earnings
as $8,109; (admitted)
(r)
on April 25, 2002, the Payor issued the Appellant a record of employment
that showed the first day of work as December 24, 2001, the last day of work as
April 19, 2002, the number of insurable hours as 680, and insurable
earnings as $8,109; (admitted)
(s) on
April 24, 2002 [sic], the Payor issued the Appellant a record of
employment that showed the first day of work as December 23, 2002, the last day
of work as April 18, 2003, the number of insurable hours as 680, and
insurable earnings as $8,559.50; (admitted)
(t)
on May 5, 2004, the Payor issued the Appellant a record of employment that
showed the first day of work as December 22, 2003, the last day of work as
April 30, 2004, the number of insurable hours as 760, and insurable
earnings as $9,566.50; (admitted)
(u) on
May 11, 2005, the Payor issued the Appellant a record of employment that showed
the first day of work as December 13, 2004, the last day of work as May 6,
2005, the number of insurable hours as 940, and insurable earnings as $10,573.50;
(admitted)
(v) in
actual fact, the Appellant worked for the Payor throughout the year, performing
the same duties; (denied)
(w) the
Appellant's hours of work were not recorded or paid during the eight months
when she was allegedly laid off; (admitted with explanation)
(x)
on October 19, 2006, in a statement to a
representative of the respondent, the Appellant indicated that, during her
periods of unemployment, she worked for the Payor on an unpaid basis between 7
and 10 hours a week; (admitted)
(y) the
Appellant's records of employment do not reflect reality in terms of periods of
employment and hours actually worked; (denied)
(z)
the employment terms and conditions, remuneration and duration of
employment of a person dealing at arm's length would not have been similar to
those of the Appellant. (denied)
[6] With regard to
paragraph 7(d), the evidence shows that, in addition to the hours of operation
indicated, the Payor's establishment (Le relais de la station) sometimes stayed
open until between midnight and 3 a.m. in the winter, and opened at 3 p.m.
on Fridays in the summer.
[7] In addition to performing
the duties indicated in paragraph 7(h), the Appellant was responsible for
counting the money in the servers' till each morning, preparing the cash float
for the day, filling the beer coolers, doing the bookkeeping and emptying the
video poker terminal.
[8] In winter, she also
had to lug in wood and light the stove, and shovel the snow off the verandas
outside the bar.
[9] As regards the work
performed by the Appellant for the Payor outside these periods of employment,
the Appellant admitted that she performed substantially the same duties
year-round, but that, in summer, the work took much less time. She stated that
she worked for the Payor 40 hours a week, from Monday to Friday, during the winter,
but only between half an hour and an hour a day in the summer. She explained that cleaning the bar
involved much lighter work in the summer. For example, in the summer the floor
needed washing only once a week, compared with every day in the winter (because
of the snow), and she did not have to light the stove. Since the bar was not as busy in
the summer and the hours of operation were shorter, there was less work to be
done. In summer, there were only three servers, compared with four in the
winter. In summer, the bar sold less beer and alcohol than in winter, which
meant that placing orders, tabulating sales and refilling the coolers took less
time. The same was
true of the bookkeeping and accounting duties. She also confirmed that the work
done for the Payor outside her periods of employment was unpaid work.
[10] According to Melissa
Lesage, who worked as a server for the Payor from September 2000 to May 2002
and from September 2002 to May 2003, the Appellant worked on the Payor's
premises at least three hours a day, seven days a week, during the summer. She stated that the Appellant would
arrive at about 8 a.m. and would not leave before 11 a.m., and would come
back to help serve during busy periods. She also indicated that the Appellant
had worked for the Payor seven days a week during the winter. On weekends, the Appellant
would do the same work as during the week between 8 and 11 a.m. and would help
serve, if necessary, on Saturday and Sunday afternoons, the busiest times. Ms. Lesage
stated that she herself had been paid an hourly wage and had been paid for all
hours worked.
Appellant's position
[11] Counsel for the Appellant
began by citing the decision of the Federal Court of Appeal in Légaré v. Canada (Minister of National
Revenue), [1999] F.C.J. No. 878 (F.C.A.) (QL), in which the Court
stated the following concerning the role of the Court in an appeal from a
decision of the Minister such as that in the case before us:
[4] The Act
requires the Minister to make a determination based on his own conviction drawn
from a review of the file. The wording used introduces a form of subjective
element, and while this has been called a discretionary power of the Minister,
this characterization should not obscure the fact that the exercise of this
power must clearly be completely and exclusively based on an objective
appreciation of known or inferred facts. And the Minister"s determination
is subject to review. In fact, the Act confers the power of review on the Tax
Court of Canada on the basis of what is discovered in an inquiry carried out in
the presence of all interested parties. The Court is not mandated to make the
same kind of determination as the Minister and thus cannot purely and simply
substitute its assessment for that of the Minister: that falls under the
Minister"s so-called discretionary power. However, the Court must verify
whether the facts inferred or relied on by the Minister are real and were
correctly assessed having regard to the context in which they occurred, and
after doing so, it must decide whether the conclusion with which the Minister
was "satisfied" still seems reasonable.
[12] Counsel for the Appellant
argued that the Minister erred in arriving at his conclusion in this case, as
he took into account work done by the Appellant for the Payor outside the
periods of employment. He cited the decision of the Federal Court of Appeal in Théberge
v. Canada (Minister of National
Revenue), 2002 FCA 123, in which the Court stated:
[19] What a claimant does
outside the period during which he or she is employed in what the Minister
considers to be insurable employment can be relevant, for example, to verify
that the claimant is unemployed, to determine the amount of his or her
benefits, or to establish his or her period of unemployment. However, for the
purposes of the exception provided in paragraph 3(2)(c) of the Act, what
a claimant does outside his or her period of employment will be of little
relevance when, as in this case, it is not alleged that the salary paid during
the period of employment took into account the work performed outside of that
period, that the applicant had included, in the hours spent on his or her
insurable employment, hours worked outside of the period, or that work performed
outside of his or her period of employment had been included in the work
performed during his or her period of employment. It seems to me to be
self-evident, and this is confirmed by the evidence, that in the case of family
businesses engaged in seasonal work, the minimal amount of work that remains to
be done outside the active season is usually performed by family members,
without pay. Excepting seasonal employment, in a family farm business, on the
ground that cows are milked year-round amounts, for all practical purposes, to
depriving family members who qualify by working during the active season of
unemployment insurance and to overlooking the two main characteristics of such
a business: that it is a family business and a seasonal business.
[20] A claimant is not
required to remain completely inactive while he or she is receiving benefits.
Under section 10 of the Act, benefits are payable for each "week of
unemployment" included in the benefit period and a "week of
unemployment" is a week during which the claimant does not work a full
working week. Under subsection 15(2) of the Act, a claimant may have earnings
in respect of any time that falls in a week of unemployment and those earnings
will be deducted only if they are in excess of an amount equal to twenty-five
per cent of the claimant's weekly benefit. It is moreover settled law that work
that is truly unpaid does not affect a claimant's status as unemployed (Bérubé
v. Canada (Employment and Immigration), (1990) 124 N.R. 354 (F.C.A.)). I also note that under subsection 43(3)
of the Unemployment Insurance Regulations, a claimant who is employed in
farming is not regarded as working a full working week at any time during the
period from October 1 to March 31 if the claimant proves that the work he or
she performed was so minor that it would not have prevented him or her from
accepting full-time employment. I realize that those provisions do not apply,
strictly speaking, in insurability cases, but they are nonetheless part of the
backdrop.
[21] Getting back to this
particular case, the fact that the applicant worked without pay for ten to
fifteen hours each week outside the active season and while he was receiving
benefits may indicate that he would not have performed that unpaid work if he
had not been his employer's son. However, that is not the work we are concerned
with, and the judge erred by taking it into account in the absence of any
indication that the insurable employment at issue was subject to special terms
and conditions that were attributable services being rendered outside the
period of employment.
[13] Counsel for the Appellant
argued that the ruling in Théberge was followed by the Court of Appeal
in Aspiro v. Canada (Minister of National Revenue), 2000
CANLII 15255 (F.C.A.) and Chouinard v. Canada (Minister of National
Revenue), 2003 FCA 338. Counsel for the Appellant also argued that the work
done without pay by the employee in Théberge was regular work that took
at least 10 hours a week, as was the case for the Appellant. Finally, he maintained
that there was nothing in the evidence to show that the terms and conditions,
remuneration or duration of the work would have been any different had there
been an employment contract between two parties dealing with each other at
arm's length.
Analysis
[14] Based on the
admitted facts in evidence, the Appellant has not persuaded me that the
Minister's decision no longer seems reasonable. In my view, the unpaid work done by the Appellant
for the Payor outside the periods of employment is a fact that the Minister is
entitled to consider in assessing the relationship between the parties. In Malenfant v. Canada (Minister of
National Revenue), 2006 FCA 226, the Federal Court of Appeal limited
the scope of its decision in Théberge to circumstances where the Payor's
business is a strictly seasonal family business, stating the following:
[11] As far as the ratio decidendi in Théberge is
concerned, I do not think it applies in this case. Here, we are not dealing
with a strictly seasonal family business, as was the case in Théberge.
The business for which the Appellant worked operated throughout the year and
also employed persons who were at arm’s length. In addition, the pay received
by these persons was as a rule different from what the Appellant accepted and
received and could not be explained otherwise but by the fact that the Appellant
and payer were not dealing at arm’s length. There was nothing like this in Théberge.
Finally, in Théberge, there was no substantial number of hours spent on
voluntary work during the paid hours of work, unlike in the case at bar.
[15] In this case, it
is clear that the Payor operated its bar throughout the year, even if business
was slower in the summer. Business was still considerable in the summer months,
and the bar was open seven days a week. Moreover, in summer, the Payor employed
three persons who were at arm's length. This was not a strictly seasonal family
business.
[16] With regard to Aspiro
and Chouinard, which were also cited by counsel for the Appellant,
it seems that the payors in those cases were also strictly seasonal family
businesses.
[17] Moreover, I am
convinced that the scope of the Appellant's work for the Payor every summer was
much greater than she claimed. I accept the testimony in this regard given by
Ms. Lesage, a disinterested witness, who stated that the Appellant had
worked at least three hours a day, seven days a week, during the summer, not
counting the helping hand she provided when needed during peak periods. Ms. Lesage also stated that the
Appellant's husband (who was the sole shareholder in the Payor) seldom worked
in the business, even on weekends, contrary to what the Appellant claimed.
[18] In her rebuttal
evidence, the Appellant did not contradict Ms. Lesage's statements. In any event, I have difficulty
believing that the Appellant could have accomplished in one hour a day most of
the duties that took her eight hours a day in winter, given that the Payor's
business was still considerable in summer. Finally, the Appellant did not produce
any other witnesses to support her statements.
[19] With regard to
the wages, the onus was on the Appellant to prove that her wages were
reasonable having regard to the circumstances. The evidence shows that, during her periods of
employment, the Appellant worked 40 hours a week from Monday to Friday and at
least six hours more on Saturdays and Sundays. The evidence also shows that she
was paid straight wages of $475 a week. It
is not clear whether those wages took into account a workload beyond 40 hours a
week and beyond five days a week, or whether the amount paid was equal to what
the Payor would have had to pay an employee at arm's length. No evidence in
this regard was adduced. The Appellant therefore did not succeed in proving
that the remuneration she received was reasonable under the circumstances.
[20] For all of these
reasons, I find that, upon consideration of all of the evidence, the Minister's
conclusion in this case still seems reasonable. The appeal is accordingly
dismissed.
Signed at Ottawa, Canada, this 10th day of March 2008.
"B. Paris"
Translation
certified true
on this 6th day of
May 2008.
Carole Chamberlin, Translator
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