[OFFICIAL ENGLISH TRANSLATION]
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Citation: 2004TCC610
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Date: 20040913
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Docket: 2004-1070(EI)
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BETWEEN:
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SALON DE QUILLES DE MATANE INC.,
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Appellant,
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And
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THE MINISTER OF NATIONAL REVENUE,
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Respondent,
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AND BETWEEN:
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Docket: 2004-1069(EI)
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CLAUDETTE CHOUINARD,
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Appellant,
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And
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THE MINISTER OF NATIONAL REVENUE,
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Respondent.
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REASONS FOR JUDGMENT
Tardif J.
[1] These are two appeals from
determinations dated December 23, 2003, under
paragraphs 5(1)(a) and 5(2)(i) and
subsection 5(3) of the Employment Insurance Act
("Act") concerning the same employment; one appeal was
filed by the employer, the other by the person who performed the
work.
[2] The parties agreed to proceed on
common evidence. The periods concerned by the appeals are as
follows:
· from
November 8, 1998, to May 28, 1999;
· from
February 6 to May 12, 2000;
· from
December 31, 2000, to April 28, 2001;
· from
January 20 to May 4, 2002;
· from
November 3, 2002, to May 3, 2003.
[3] The work the Appellant performed
for Salon de Quilles de Matane Inc. during the aforementioned
periods was excluded from insurable employment because the
Appellants were not dealing with each other at arm's length.
The Minister of National Revenue (the "Minister")
concluded that it was not reasonable to conclude that the parties
would have entered into a substantially similar contract of
employment if they had been dealing with each other at arm's
length. The work was therefore excluded from insurable employment
under paragraph 5(2)(i) of the Act, which reads as
follows:
5.(2) Insurable employment does not include
[. . .]
(i)
employment if the employer and employee are not dealing with each
other at arm's length.
[4] In reaching this conclusion, the
Minister relied on the following assumptions of fact in the
appeal of Salon de Quilles de Matane Inc.:
[TRANSLATION]
10. [...]
(a) until
December 14, 2000, the voting shares of the Appellant were
distributed equally between Jeannot Fortin and his brother
Jean-Marc Fortin;
(b) since
December 15, 2000, Jeannot Fortin has held
66 2/3 percent of the shares and Jean-Marc
33 1/3 percent;
(c) the Worker has
been Jeannot Fortin's de facto spouse since 1990;
(d) until
December 14, 2000, the Worker was related to
Jeannot Fortin, a member of a group that controlled the
Appellant;
(e) since
December 15, 2000, the Worker has been related to
Jeannot Fortin, who controls the Appellant.
11. [...]
(a)
Jeannot Fortin and his brother Jean-Marc had operated
a bowling alley since December 7, 1970; they transferred the
business to the Appellant on September 2, 1992;
(b) the Appellant
owns a two-storey building housing the bowling alley located in
downtown Matane;
(c) the ground floor
of the building is occupied by the reception counter, which
offers shoe rentals, the sale of chips and soft drinks, six
bowling lanes and a 25- to 30-seat bar mainly
offering beer;
(d) the second floor
houses the other six bowling lanes, and the basement is occupied
by a five-table billiard room;
(e) the Appellant
operates its bowling alley year-round, with the exception of
July, when it closes completely;
(f) the
bowling alley is open only on Tuesday evenings from
7:30 p.m. to 9:00 p.m. and Friday evenings from
8:00 p.m. to 9:30 p.m. in July and August, and from
12:30 p.m. to 10:30 p.m. or midnight during the week
and from 12:30 p.m. to 1:30 a.m. Fridays and Saturdays
from September to the end of May;
(g) the
Appellant's busiest period begins in September, when bowling
leagues form, and ends in late May with year-end tournaments,
seniors' finals and end-of-season parties;
(h) the Worker works
at the Appellant's bowling alley as a day worker;
(i) the
Worker's main duties were to:
- welcome customers at the counter, assign them their
lanes, rent shoes and collect admissions;
- answer the telephone;
- sell chocolate, soft drinks and chips at the counter
and drinks at the bar;
- maintain the second floor and do the decoration;
(j) the Worker
took a course to learn how to enter the names of the teams and
players in the computer and generally performed that duty;
(k) the Worker had
no specific work schedule to meet; her hours were neither
compiled nor recorded by the Appellant;
(l) according
to the various versions obtained from the Appellant and the
Worker, it is impossible for us to establish the Worker's
actual hours of work (we obtained as many as seven different
versions);
(m) when she was entered
on the Appellant's payroll, the Worker received fixed
remuneration of $300 a week, without regard to the hours actually
worked;
(n) the Worker was
paid by cheque, which she cashed in the Appellant's till;
(o) the Worker
rendered numerous services to the Appellant without remuneration
outside the periods when she was entered on the payroll;
(p) the Worker was
not entered on the Appellant's payroll in September and
October of each year, although that was a very busy period for
the Appellant and was when the bowling season began;
(q) the
Appellant's periods of work did not coincide with the
Appellant's busiest periods;
(r) on June 2,
1999, the Appellant issued a record of employment in the
Worker's name for the period from November 8, 1998, to
May 28, 1999, showing 1,080 insurable hours and total
insurable earnings of $8,100;
(s) on May 16,
2000, the Appellant issued a record of employment in the
Worker's name for the period from February 6 to
May 12, 2000, showing 560 insurable hours and total
insurable earnings of $4,200;
(t) on
May 4, 2001, the Appellant issued a record of employment in
the Worker's name for the period from December 31, 2000,
to April 28, 2001, showing 680 insurable hours and
total insurable earnings of $5,100;
(u) on May 9,
2002, the Appellant issued a record of employment in the
Worker's name for the period from January 20 to
May 4, 2002, showing 600 insurable hours and total
insurable earnings of $4,500;
(v) on May 7,
2003, the Appellant issued a record of employment in the
Worker's name for the period from November 3, 2002, to
May 3, 2003, showing 1,040 insurable hours and total
insurable earnings of $7,800;
(w) the records of
employment issued by the Appellant in the Worker's name do
not reflect the actual situation with respect to the periods
actually worked or to the hours actually worked by the
Worker;
[5] The facts alleged in
subparagraphs 10(a), (b), (c), (d) and (e) and
subparagraphs 11(a), (b), (c), (d), (e), (g), (h), (i), (j),
(n), (r), (s), (t), (u) and (v) were admitted, and the others
were denied, with the exception of subparagraph (l), of
which the Appellants knew nothing.
[6] The burden of proof was on the
Appellants. The evidence consisted of the testimony of
Jean-Marc Fortin, the holder of
33 1/3 percent of the corporation's shares; the
remaining 66 2/3 percent was held by
Jeannot Fortin, the Appellant's spouse, who did not
testify. The Appellant Claudette Chouinard also
testified.
[7] The Respondent called the two
persons responsible for the cases as witnesses,
Claire Fradette and Louise Dessureault, respectively
investigator and appeals officer.
[8] Mr. Fortin explained that the
corporation's turnover had declined from year to year. After
experiencing years in which the annual turnover was approximately
$300,000, the company now had turnover of slightly more than
$100,000.
[9] The radical drop in turnover
resulted from the arrival of two other bowling alleys in Matane.
However, I noted that the turnover had nothing to do with
profits, since the business had always incurred major losses,
even when turnover was at its peak.
[10] Mr. Fortin described the work of
the Appellant Claudette Chouinard, his own and that of his
brother, who held 66 2/3 percent of the shares issued.
The operations of the business were conducted on three separate
floors: the basement, where a billiard room was operated, and the
other two floors, two bowling alleys, with one six-lane alley per
floor. Apart from these activities, the corporation operated on
the first floor, where there was a reception counter, a small
restaurant, a bar, and a service desk where lanes and shoes were
rented.
[11] Peak season was from September to late
May, when leagues and teams competed, and included the various
parties that were normally held before and during the Christmas
holidays.
[12] The bowling alley was completely closed
for one month each year, in July, while business hours and days
were at their shortest in June and August.
[13] Mr. Fortin's testimony showed
that he mainly did the accounting, whereas his brother handled
everything. As to the Appellant Chouinard, her duties consisted
in welcoming customers, providing service, renting the lanes and
shoes, answering the telephone, doing counter sales, and
maintaining the second floor and the decoration. The Appellant
had also taken a course to learn how to input the names of
bowlers and results in a computer system; she also did the
cleaning. She was clearly qualified to do everything. For her
work, she received a weekly salary of $300.
[14] The company's representative
explained that the start and end dates of the periods of
employment were determined by the business's ability to pay,
water damage, and a furnace breakdown. However, the link between
the start and end dates of the periods of employment and those
three events was not clear; the explanations were implausible and
often confused, unclear and incoherent.
[15] Mr. Fortin also stated that the
company had previously hired two women to do appreciably the same
work for the same wage. Both were informed in 1998 that their
services were definitely no longer required as a result of the
financial situation, which, according to the two signatories of
the notice, Jean-Marc and Jeannot Fortin, had become
precarious.
[16] One important detail is that the two
women did not testify; the period and duration of employment were
not established.
[17] As to Mesdames Fradette and
Dessureault, their testimony was precise and, in particular,
substantiated by highly relevant documents and tables.
[18] One of those tables
(Exhibit I-3) showed convincingly that the
Appellant's work had nothing to do with the level of
operations. In September and October, months described as very
busy, the Appellant was always unemployed from 1998 to 2003.
[19] The other table
(Exhibit I-1) shows long periods during which the
Appellant and Jean-Marc Fortin did not work, or rather
did not receive remuneration, but nevertheless received
employment insurance benefits. Need it be recalled that the
company's business operations were conducted simultaneously
on three separate floors?
[20] The Appellant Chouinard admitted that
she had done the same work, but without being remunerated, during
the slow periods, the duration of which could however not be
determined as a result of the many contradictory versions.
[21] One question of decisive importance is
whether the business could do without the Appellant
Chouinard's services during the period from October to
December of each year. The answer is a categorical no.
[22] Ms. Fradette also compiled highly
revealing data, which moreover corroborate the picture that
emerges from all the other elements and aspects of the case.
[23] She audited the dates of the claims for
employment insurance benefits, the number of weeks of benefits
available and, lastly, the number of weeks claimed by the
Appellant Chouinard. The result was eloquent, and is as
follows:
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Year
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Date of claim
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Number of available weeks
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Number of weeks claimed or used
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1999
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May 30
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33
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33
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2000
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May 14
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30
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28
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2001
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April 29
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35
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35
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2002
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May 5
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32
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24 weeks used at the time of the audit, at which
time the Appellant was still not working
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[24] The Respondent also filed the report
(Exhibit I-2) prepared by Louise Dessureault. I
think it useful to cite certain passages therefrom:
[TRANSLATION]
[...]
Facts taken from the statutory declaration of
Jeannot Fortin, a shareholder of the Payer, Salon de Quilles
de Matane Inc., made to Claire Fradette, investigation and
control officer with HRDC in Rimouski, on July 4,
2003.
(Tab A)
[...]
7. She rendered service starting in
October.
[...]
10. Claudette Chouinard served at the counter, did
cleaning, entered the names of the players in the computer for
each of the leagues. She worked 30 to 40 hours a week.
[...]
Facts taken from the statutory declaration of
Claudette Chouinard, the Worker, made to
Claire Fradette, investigation and control officer with HRDC
in Rimouski, on July 4,
2003.
(Tab B)
[...]
16. She did not know exactly how many hours she had
worked per week. She never recorded her hours.
[...]
18. From September to October, she helped him on Monday
mornings and went there every two days, seven or eight hours a
week, without pay, to help her friend.
[...]
Facts taken from insurability report CE0319 7102 3352,
prepared by Alain Landry, coverage officer from the
Québec Tax Services
Office
(Tab C)
[...]
• She generally worked
70 hours a week;
[...]
23. The officer also communicated with
Jeannot Fortin, a shareholder of the Payer, by telephone on
August 5, 2003, and gathered the following facts:
[...]
• During the periods when she was
not employed, she could render the same services as when she was
not employed;
• She accompanied him to the
bowling alley so as not to stay at home;
• She did so without pay as a
favour to him;
• He would not hire a stranger
paid by the week because it would cost him too much. He would pay
him by the hour and control his hours.
Facts obtained from Jeannot Fortin, shareholder of the
Payer, by telephone on December 9, 2003.
[...]
40. His companion, Claudette Chouinard, did a bit
of everything: cleaning, decoration, counter work. She welcomed
people at the counter (collected their admissions) and entered
players' names in the computer, since each lane was linked to
the computer, and answered the telephone.
41. The computer entries were made by Claudette;
Jean-Marc could do a little, but, since he had had
Claudette take courses for that, it was she who operated the
computer, which was located at the reception counter.
[...]
43. Claudette Chouinard worked five to seven days a
week, depending on how busy it was and the time of year, and he
paid her for 40 hours of work a week, even if she worked
more than 40 hours.
[...]
46. Jeannot Fortin added that two persons were
necessary when people bowled, in view of the fact that there were
three floors, the bar, 12 bowling lanes and the reception
counter, which also offered soft drinks and chips, or else they
would be robbed, and that one person alone could not see to
everything, enter the players in the computer and the rest.
[...]
Facts taken from the documents in insurability file
CE0319 7102 3352 of the Worker,
Claudette Chouinard.
[...]
69. In 1998-1999, the Worker was paid by the Payer
from November 8, 1998, to May 28, 1999, that is, over
29 weeks. From 1999 to 2002, September and October sales
show that the business resumed full operation and the
Worker's paid period of employment does not cover those
months.
70. In 2000, the Worker resumed work on February 6,
after 36 unpaid weeks, whereas monthly sales varied from $9,352
in September 1999 to more than $18,000 in November and December
1999 and $16,000 in January 2000. She stopped on May 13,
2000, after 14 paid weeks.
71. In 2001, the Worker resumed work on
December 31, 2000, after 33 unpaid weeks, whereas
monthly sales varied from $8,737 in September 2000 to more than
$15,000 in October and November and nearly $18,000 in December
2002. She stopped on April 28, 2001, after 17 paid
weeks.
72. In 2002, the Worker resumed work on January 20,
after 38 unpaid weeks, whereas monthly sales were more than
$8,000 in September and October 2001 and more than $13,000 in
November and December 2001 and in January 2002. She stopped on
May 4, 2002, after 15 paid weeks.
73. In 2002-2003, the Worker resumed work on
November 3, after 26 unpaid weeks, whereas monthly
sales were more than $7,000 in May, June and September and more
than $12,000 in October. She stopped on May 3, 2003, after
26 paid weeks, whereas sales in May 2003 were $10,906.
[25] The employment insurance program is a
social program put in place to help those who actually lose their
jobs and to meet their financial needs. It is not in any way a
program to assist businesses by enabling them to pass on a
portion of their payroll to the government.
[26] In the instant case, not only was the
determination reasonable and judicious, it resulted from
impeccable work that took into account all the relevant
facts.
[27] Having regard to the evidence, it would
even have been appropriate to conclude that the periods of work
were essentially determined by the requirements for obtaining
employment insurance benefits. One thing is certain: a third
party would not have enjoyed such flexibility. However, that
party would never have agreed to be as generous in providing
services free of charge.
[28] The appeals are dismissed, and the
determinations at the origin of the appeals are confirmed as well
founded in fact and in law.
Signed at Ottawa, Canada, this 13th day of September 2004.
Tardif J.
Certified true translation
Colette Dupuis-Beaulne
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