Citation: 2006TCC614
Date: 20061114
Docket: 2005-1158(EI)
BETWEEN:
CHRISTINA JACKSON,
Appellant,
and
THE MINISTER OF NATIONAL REVENUE,
Respondent.
Docket: 2005-1403(EI)
AND BETWEEN:
CHRISTINA JACKSON,
Appellant,
and
THE MINISTER OF NATIONAL REVENUE,
Respondent.
REASONS FOR JUDGMENT
Beaubier, J.
[1] These appeals were
heard together on common evidence at Kelowna, British Columbia on November 3, 2006. The
Appellant and her husband, Dr. Craig Jackson, testified for the Appellant. The
Respondent’s counsel called Ken Wong, the appeals officer on the files. Docket
no. 2005-1158(EI) is an appeal of a contrary ruling respecting the employment of
the Appellant by the 50%-50% medical Partnership of Dr. Dennis Waechter and Dr.
Craig Jackson Management (“Mgt”) for the period August 31, 2003 to August 31,
2004. Docket no. 2005-1430(EI) is an appeal of a contrary ruling respecting the
employment of the Appellant by Dr. Craig Jackson’s wholly owned Corporation,
Dr. C.S. Jackson MD Inc. (“MD Inc.”) for the same period. During the same
period, the Appellant was also employed part time (for half of the school week)
by a Vernon high school as a
teacher of mathematics and sciences.
[2] Paragraphs 2 to 8
inclusive of the Reply to the Notice of Appeal 2005-1158(EI) read:
2.
With respect to the
whole of the Notice of Appeal he denies the following allegations of fact:
a) the Appellant’s
employment contract was exactly the same as the previous office manager of the
Partnership and the Corporation;
b) the Appellant’s employment,
working hours, and wages were all exactly similar to that which would be
offered to a replacement employee in the event that the Appellant stopped
working for the Partnership and the Corporation;
c)
the Appellant is
dealing at arm’s length with the Partnership.
3.
He has no knowledge
of the remaining relevant allegations of fact stated in the Notice of Appeal.
4.
On October 6, 2004
the Minister of National Revenue (the “Minister) issued a ruling determining
that the Appellant was not employed in insurable employment with the
Partnership as she was not dealing with the Partnership at arm’s length during
the period from August 31, 2003 to August 31, 2004 (the “Period”).
5.
By letter dated
October 7, 2004 the Appellant appealed the ruling pursuant to section 91 of the
Employment Insurance Act, S.C. 1996 c. 23 (the “Act”).
6.
By letter dated March
2nd, 2005 the Minister determined that the Appellant was not employed by the
Partnership in insurable employment during the Period and found that the
Appellant was not dealing with the Partnership at arm’s length pursuant to
paragraph 5(2)(i) of the Act.
7.
In determining that
the Appellant was not employed in insurable employment with the Partnership
during the Period, the Minister relied on the following assumptions of fact:
a) during the Period the Appellant
worked for the Partnership and for the Corporation;
b) the Appellant worked for the
Partnership and the Corporation since 1998;
c)
the Partnership, also
known as Waechter Jackson Management is between Dr. Dennis Waechter and Dr.
Craig Jackson;
d)
the Partnership
operated a family medical practice;
e)
the Appellant is
married to Craig Jackson;
f)
the Appellant is a
certified general accountant;
g)
during the Period the
Appellant was the office manager/ comptroller of the Partnership and the
Corporation;
h)
during the Period the
Appellant’s duties for both the Partnership and the Corporation included daily
billings, supervision of office staff, ordering of supplies, bookkeeping,
payroll, all financial reporting and budgeting;
i)
the Appellant alleges
that during the Period she worked 7.5 hours per day on Thursdays and Fridays
for the Partnership and 7.5 hours per day Tuesdays and Wednesdays for the
Corporation;
j)
during the Period the
Appellant’s hours worked at the Partnership and the Corporation were not
recorded;
k)
during the Period the
Appellant also worked 2.5 days per week as a part time as a (sic) teacher
for the Vernon School District;
l)
during the Period the
Appellant’s rate of pay in respect of her employment with both the Partnership
and the Corporation was $14.50 per hour.
m)
during the Period the
Appellant actually received $1,000.00 bi-weekly from the Partnership and
$3,000.00 per month from the Corporation for a total of $5,000.00 per month;
n)
during the Period the
Appellant was provided coverage for dental, life and disability benefits under
the Partnership’s plan;
o)
the previous office manger
(sic) of the Partnership and the Corporation was, Valerie Burnett
(“Valerie”);
p)
Valerie was issued a
T4 from the Partnership but was not issued a T4 from the Corporation;
q)
the Partnership did
not pay the Appellant a substantially similar wage as that paid to Valerie;
r)
the Appellant went on
maternity leave on August 31, 2004; and
s)
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 not reasonable to conclude that the Appellant and the
Partnership would have entered into a substantially similar employment contract
if they had been dealing with each other at arm’s length.
B. ISSUES TO BE DECIDED
8.
The issue is whether
the Appellant was employed in insurable employment with the Partnership during
the Period.
Respecting the assumptions in
paragraph 7, all except assumptions in subparagraphs (l), (o) and (s) are
correct. Respecting (l), (o) and (s):
(l) – During the
period, the Appellant’s pay by Mgt was $2,000 per month. While she
allegedly worked 7.5 hours on Thursdays and Fridays, in fact her hours were
discretionary to her and occurred Tuesday through Saturday, usually in
the late afternoons into the evening, sometimes commencing at about
3:00 p.m. and continuing until about 6:00 or 7:00 p.m.
(o) – The previous manager
of the Partnership was Jill Powell (“Jill”) who quit suddenly on two
weeks notice. Valerie Burnett preceded Jill and was dismissed for cause. The
Appellant had more duties than both her predecessors because
the predecessors did not do the billing, payroll or financial
reporting and budgeting, which the Appellant did; when her predecessors
managed Mgt, the Appellant did these latter tasks, but the manager
did the other tasks described in subparagraph (h).
(s) – will be dealt
with at a later point herein.
[3] Paragraphs 1 to 9
inclusive of the Reply to the Notice of Appeal 2005-1430(EI) read:
A. STATEMENT OF FACTS
1. With respect to the whole of the
Notice of Appeal he admits the following allegations of fact:
a)
the Appellant worked
as the comptroller/manager for Dr. C.S. Jackson MD Inc., (the “Corporation”)
and the partnership of Dr. Dennis Waechter and Dr. Craig Jackson Management
(the “Partnership”);
b)
the Appellant has
been an employee and has had Employment Insurance amounts deducted from her
earnings for the duration of her employment with the Corporation and the
Partnership.
2.
With respect to the
whole of the Notice of Appeal he denies the following allegations of fact:
a)
the Appellant’s
employment contract was exactly the same as the previous office manager of the
Corporation and the Partnership;
b)
the Appellant’s
employment, working hours, and wages were all exactly similar to that which
would be offered to a replacement employee in the event that the Appellant
stopped working for the Corporation and the Partnership.
c)
the Appellant is
dealing at arm’s length with the Partnership.
3.
He has no knowledge
of the remaining relevant allegations of facts stated in the Notice of Appeal.
4.
On October 6, 2004
the Minister of National Revenue (the “Minister”) issued a ruling determining
that the Appellant was not employed in insurable employment with the
Corporation as she was not dealing with the Partnership at arm’s length during
the period from August 31, 2003 to August 31, 2004 (the “Period”).
5.
By letter dated
October 7, 2004 the Appellant appealed the ruling pursuant to section 91 of the
Employment Insurance Act, S.C. 1996 c. 23 (the “Act”).
6.
By letter dated March
2nd, 2005 the Minister determined that the Appellant was not
employed by the Corporation in insurable employment during the Period and found
that the Appellant was not dealing with the Corporation at arm’s length
pursuant to paragraph 5(2)(i) of the Act.
7.
In determining that
the Appellant was not employed in insurable employment with the Corporation
during the Period, the Minister relied on the following assumptions of fact:
a)
during the Period the
Appellant worked for the Corporation and the Partnership;
b)
the Appellant worked
for the Corporation and the Partnership since 1998;
c)
the Corporation
operated a family medical practice;
d)
the Appellant is married
to Dr. Craig Jackson (“Dr. Jackson”);
e)
Dr. Jackson owns 100%
of the voting shares of the Corporation;
f)
the Appellant is a
certified general accountant;
g)
during the Period the
Appellant was the office manager/comptroller of the Corporation and the
Partnership;
h)
during the Period the
Appellant’s duties for both the Corporation and the Partnership included daily
billings, supervision of office staff, ordering of supplies, bookkeeping,
payroll, all financial reporting and budgeting;
i)
the Appellant alleges
that during the Period she worked 7.5 hours per day on Tuesdays and Wednesdays
for the Corporation and 7.5 hours per day on Thursdays and Fridays for the
Partnership;
j)
during the Period the
Appellant’s hours worked for the Corporation and the Partnership were not
recorded;
k)
during the Period the
Appellant also worked 2.5 days per week as a part time as a (sic)
teacher for the Vernon School District;
l)
during the Period the
Appellant’s rate of pay in respect of her employment with both the Corporation
and the Partnership was $14.50 per hour;
m)
during the Period the
Appellant actually received $1,000 bi-weekly from the Partnership and $3,000
per month from the Corporation for a total of $5,000 per month;
n)
during the Period the
Appellant was provided coverage for dental, life and disability benefits under
the Partnership’s plan;
o)
the previous office
manger (sic) of the Partnership and the Corporation was, Valerie Burnett
(“Valerie”);
p)
Valerie was issued a
T4 from the Partnership but was not issued a T4 from the Corporation;
q)
the Corporation did
not pay the Appellant a substantially similar wage as that paid to Valerie;
r)
the Appellant went on
maternity leave on August 31, 2004; and
s)
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 not reasonable to conclude that the Appellant and the
Corporation would have entered into a substantially similar employment contract
if they had been dealing with each other at arm’s length.
B. ISSUES TO BE
DECIDED
8. The issue is whether the Appellant was
employed in insurable employment with the Corporation during the Period.
C.
STATUTORY
PROVISIONS RELIED ON
9. He relies on paragraphs 5(1)(a), 5(2)(i)
and 5(3)(b), subsection 2(1) and on section 91 of the Act. He also
relies on section 251 of the Income Tax Act, R.S.C. 1985, c.1 (5th
Supp.) as amended.
[4] Assumptions 7(a),
(b), (d), (e), (f), (g), (j), (k), (m), (n), (p) and (r) were either confirmed
by the evidence or were not refuted. Respecting the remaining assumptions:
(c) – MD
Inc. was Dr. Jackson’s corporate person; it operated his interest in Mgt and
his practice in two additional medical clinics in Vernon, British Columbia
and also managed a condominium it owned in Whistler, British Columbia.
(h) – The
Appellant’s duties for MD Inc. included the records and billings, bookkeeping,
financial, management and budget work for the two clinics’ operations and
all of the management, bookings and financial aspects of the condominium
which MD Inc. rented as a vacation property to various customers in Whistler,
British Columbia, about 400 kilometres from MD Inc.’s premises in
Vernon.
(i) – Is
the allegation, but the evidence, which is believed, is that the work was
done from the Appellant’s home office at various times including Tuesdays and
Wednesdays for about 15 hours each week.
(l) and (m)
– The Appellant’s rate of pay was $3,000 per month which was based on a
combination of hours worked and MD Inc.’s income earned.
(o) and (g)
– No one except Dr. and Mrs. Jackson ever worked for MD Inc..
(s) – will
be dealt with at a later point.
[5] A large volume of
information was placed in evidence at the hearing which was not in evidence at
the appeals level before the Minister of National Revenue. The Appellant taught
two and one-half days per week; on Tuesdays until 11:15 a.m., on Thursdays
until 2:30 p.m. and the remaining full day period divided between Wednesdays
and Fridays. After teaching from Tuesday through Friday she usually went to Mgt’s
office where her hours were not fixed, but where she often worked for 2 to 3
hours after the office closed for patient appointments at 5:00 p.m. Tuesday through
Friday. MD Inc.’s work was done during the day on Monday and during
intermittent times including evenings on other days, averaging 15 hours per
week. All medical billing work required the patient charts and about 75% of the
billing was paid on a timely basis; the remaining 25% often required follow-ups
and more detailed particulars from the files. Some of this was available from
the offices’ computers to the home office computer. (Valerie Burnett had also
worked from home at times.) The Appellant provided monthly financial reporting
to both employers; Valerie did not. Actual staff management for Mgt was done in
the office premises. This required scheduling employees’ hours and work days
and actually managing the employees from time to time as distinct from managing
their medical duties for the doctors. Neither previous manager of Mgt had done
the financial billings, accounting et cetera that the Appellant did.
[6] The Appellant
testified that, at $2,000 per month, she was under paid by Mgt considering that
her management duties also included the financial work. The Appellant had 10
years previous accounting experience in a senior position in Vancouver so her accounting
experience was extensive. The previous manager, Jill, of Mgt had done 3 days
management work and 2 days medical assistance work, but no financial or
accounting work.
[7] Respecting Mgt, to
the Court –
Remuneration paid – Having regard to the
Appellant’s duties, the fact that the job was part time, and the fact that Dr.
Waechter, who is not related to the Jacksons, had a 50% input into the hiring
and employment transaction, this appears reasonable and what would be paid in a
similar arm’s length transaction.
The Court makes the same finding
respecting the terms and conditions of employment, and the duration
and the nature and importance of the work performed. Both the management
and the accounting or financial duties were very important to the successful
and profitable operation of the Partnership, and they required an experienced
and mature employee, but the job was part time. There had been financial
problems with Valerie which the Appellant corrected in part with more extensive
accounting including monthly financial statements which were reviewed by the
Appellant with Mgt’s partners and, respecting the Corporation, with Dr.
Jackson. Moreover, the partners were only given two weeks notice when Jill quit
in which to hire a suitable replacement. The Appellant had computerized the
bookkeeping and the office under contract and knew the office’s set up, which
is part of the reason that Mgt hired her.
[8] As a result, the Appeal
by the Appellant of Docket No. 2005-1158(EI) is allowed and the Appellant is
awarded one-half of the costs or disbursements to which she is entitled
pursuant to the Employment Insurance Act.
[9] Respecting MD Inc.,
to the Court –
Remuneration paid – Assumption 7(p) in
Docket No. 2005-1403(EI) is wrong; Valerie was never employed by the Corporation
and did not receive a wage from it. Thus, without any evidence of a comparable
wage or set of employment duties, the question is whether $3,000 per month was
a reasonable wage for the Appellant’s part time job. She had to prepare and
recover Dr. Jackson’s billings from two clinics at which Dr. Jackson worked
each week in the Vernon area; she managed all aspects of the Vernon condominium
and she did all of the financial work for the Corporation. This required
financial experience, medical experience, and a full range of property
management experience and the skills for all of this. The job was part time and
she was paid $36,000 per year. The only comparison the Court has in evidence is
that concerning the Partnership for which she was paid $2,000 per year by the
partners. The Appellant testified that MD Inc. required more time from her than
did the Partnership. That is credible because MD Inc. did not have an office in
either of the other two clinics’ premises and renting and managing property is
time consuming. The result is that, on balance, the Court finds that the
remuneration paid was reasonable.
- The terms and conditions of the
employment were also reasonable for a part time job with the complications and
responsibilities this job had.
- Similarly, the duration and
nature and importance of the work performed required someone who would work
part time and in addition had strong accounting and medical billing skills and
knowledge, who could carry on all aspects of property management and could
prepare full financial statements. This is a rare combination of skills; it
does not come cheap; and it is even rarer if it is available for part time
work.
[10] The result is that
it is reasonable to conclude that the Appellant and the Corporation would have
entered into a substantially similar contract of employment if they had been
dealing with each other at arm’s length and the Court so finds.
[11] The Appellant’s
appeal of Docket No. 2005-1403(EI) is allowed and the Appellant is awarded
one-half of the costs or disbursements to which she is entitled under the Employment
Insurance Act.
Signed at OTTAWA, Canada this 14th day of November, 2006.
“D.W. Beaubier”
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