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File: 2001-1417(EI)
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BETWEEN:
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LUCIE BACON,
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Appellant,
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and
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THE MINISTER OF NATIONAL REVENUE,
Respondent,
and
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RÉJEAN RIOUX O/A LA POURVOIRIE DU GOÉLAND ENR.,
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Intervener.
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____________________________________________________________________
Appeal heard on November 7, 2003, at Trois-Rivières,
Quebec.
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Before: The Honourable
Judge François Angers
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Appearances:
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Counsel for the appellant:
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Gilbert Nadon
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Counsel for the respondent:
Counsel for the intervener:
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Claude Lamoureux
Gilbert Nadon
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____________________________________________________________________
JUDGMENT
The appeal is dismissed
and the decision of the Minister of National Revenue is affirmed, in accordance
with the attached Reasons for Judgment.
Signed at Ottawa, Canada, this 21st day of January, 2004.
Angers J.
Certified true translation
Colette Beaulne
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Reference: 2004TCC70
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Date: 20040121
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File: 2001-1417(EI)
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BETWEEN:
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LUCIE BACON,
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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
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RÉJEAN RIOUX D.B.A. LA POURVOIRIE DU GOÉLAND ENR.,
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Intervener.
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REASON FOR
JUDGMENT
Angers J.
[1] This is an
appeal against a decision of the Minister of National Revenue (the
"Minister") dated January 12, 2001, to the effect that the employment
of the appellant, when she was working for Réjean Rioux (operating
as "La Pourvoirie du Goéland enr." (the "payer")
during the periods from May 18, 1997, to May 2, 1998, from May 3, 1998, to May
15, 1999 and from May 16, 1999, to May 12, 2000, was not insurable on the
grounds that a similar employment contract would not have been entered into if,
during the periods at issue, the payer and the appellant had been dealing with
each other at arm’s length within the meaning of paragraph 5(2)i) and
subsection 5(3) of the Employment Insurance Act (the "Act").
[2] The
respondent based his decision on the following assumptions of fact, which were
admitted or denied by the appellant, as shown below:
a) the payer operates a store;
(admitted)
b) Mr. Réjean Rioux is the
spouse of the appellant; (admitted)
c) the business owns 7
rental cabins; (admitted)
d) the business is operated
approximately 9 months per year; (admitted)
e) the activities of the
payer cease with the end of the hunting season in late October until the
arrival of the snowmobilers in January and again between the spring thaw and
the opening of the fishing season; (admitted)
f) the turnover of the
business is approximately $100,000 per year; (admitted)
g) the business generates
as much income during the winter months as during the summer months; (denied)
h) the duties of the
appellant were to do the housekeeping in the cabins, to take reservations, to
keep the accounting books up to date, to receive customers and occasionally to
serve in the dining room and the bar; (denied)
i) the appellant's pay was
$7 an hour in the winter; (admitted)
j) the appellant's pay was
$10 an hour in the summer, with the exception of the last period at issue, when
her pay was reduced to $8.90; (admitted)
k) during the periods as
issue, the appellant was working full time both winter and summer; (denied)
l) in winter, the
appellant was paid for only 15 hours per week while she was receiving
Employment Insurance benefits; (admitted)
m) the hours of work
recorded by the payer and paid to the appellant do not correspond to the actual
number of hours worked by her, since she was working more hours than was shown
on the payroll journal; (denied)
n) the appellant performed
services for the payer outside those periods where she was entered in the
company payroll record; (denied)
[3] Réjean
Rioux and the appellant acquired a private residence, which they converted into
a small lodge with a dining room in order to operate an outfitting operation,
which they have done for the past 14 years. They added 7 cabins to rent out.
They thus live in the lodge, where their bedroom is the only private area that
they occupy. As was stated, the outfitting operation is operated for
approximately nine months per year; the remaining three months, November,
December and April, are months where there are very few visitors. During the
winter months, they operate the restaurant primarily for a clientele that
consists mainly of snowmobilers, whereas in the summer they do not operate as a
restaurant, but instead concentrate their activities on providing accommodation
for guests who hunt and fish.
[4] According
to Mr. Rioux, employees are always guaranteed a minimum number of hours per
week, even if their presence is not warranted. He explained that their schedule
varies depending on the customers and that, if things are quiet, the employees
are laid off. He also explained that the employees' hours are variable and
that, when they are at work, they are fed and sometimes also given
accommodation. There are three or four employees, including the appellant, who
work between 10 and 40 hours a week, depending on the employee and the season.
[5] For his
part, Mr. Rioux looks after everything. He does the maintenance and repair of
the buildings and equipment and also looks after the guests. On occasion he
also cleans the cabins. He explained that the profits are greater in summer
than in winter, as the expenses are higher in winter. The two seasons generate
equivalent income.
[6] For the
appellant, the guaranteed hours were 15 to 18 per week from January to March
and in October and from 40 to 45 hours per week from May to September,
depending on the period at issue. Mr. Rioux explained that the appellant's
duties were more numerous in the summer. Since there were greater profits and
fewer expenses during this season, he increased the appellant's hourly wage for
it, and reduced it again during the winter. These rates are, moreover, stated
at subsections 5(i) and (j) of the Reply to the Notice of Appeal. He recognized
that only the appellant was subject to this variation in hourly rate. Mr. Rioux
testified that the appellant was his partner in the business. They have been
married for the past 23 years. He admitted that it is difficult to calculate
the hours and that neither the appellant nor himself recorded their hours. The
appellant assisted him in everything that he was not able to do himself, as he
needed someone to be present all the time. According to him, the appellant
deserved better conditions because she was, after all, his wife. They got up
very early and went to bed very late and it was by no means rare for the
appellant to work 100 hours per week. Notwithstanding the time she devoted to
work, the appellant was paid for only 40 hours per week in 1997 and 1998 and 45
hours per week in 1990 and 2000.
[7] The
appellant looked after the bookkeeping every day of the year, unless the camp
was closed, in which case there were virtually no bookkeeping entries to be
made.
[8] The
appellant is the manager of an outfitter establishment and has been employed by
the payer since 1990. During the summer months, she receives guests at the
lodge and looks after the bar. She cleans the cabins, takes reservations, keeps
the accounting books, makes the deposits and produces the various business
reports. During the winter months, she supports the payer in his work in the
kitchen, does the housekeeping and the bookkeeping. During the periods when she
draws no salary, she does the deposits and her bookkeeping. She said that,
during these periods, these duties require very little time.
[9] In answer
to the question whether she cashed her pay cheque before making the payer's
deposits, the appellant explained that this was one way she could save time,
because at the credit union where she made the deposit, customers had to go to
a different wicket for a personal deposit.
[10] In
completing her testimony, the appellant acknowledged that her working hours
were variable and that she had to be there if the payer was absent and vice
versa. As far as her variable hourly rate was concerned, she explained it by
saying that "instead of cutting the employees, she absorbed the
cost".
[11] The report
on form CPT-110 was submitted as evidence. Ms. Johanne Nicol, the Appeals
Officer, was the author of the report. When called to testify, she explained
the steps she had taken before reaching her conclusion regarding the
appellant's conditions of employment. She had thus had telephone conversations
with the payer, the appellant, their representative, other employees of the
payer, employees of other outfitters and a representative of the Fédération des
pourvoyeurs du Québec (the Federation of Quebec Outfitters). She had also
consulted the appellant's records of employment and applications for benefit
for the periods at issue, the payroll record, the statutory declarations of the
appellant and her son, who is also employed by the payer, the reservations book
and certain items of correspondence.
[12] In her testimony,
Ms. Nicol explained that she had tried to determine the volume of work of the
payer's business and the quantity of work performed by the appellant. After
analyzing the documents in question, she found that the more departures there
were of guests, the more work there was to do, and that there were times during
the three years at issue that departures had occurred at times when the
appellant was not listed in the payroll record. Ms. Nicol studied the payroll
record and compared the appellant's pay with that of the other employees. The
appellant's hourly rate varied widely in relation to the other employees, a
fact on which Ms. Nicol based her conclusion that the appellant's hourly rate
was established on the basis of the business's ability to pay.
[13] Ms. Nicol
also took into account a contradiction between what the appellant and the payer
had said regarding the appellant's work schedule. The appellant stated that she
began her day at around 8 or 9 am and worked during the afternoon or the
evening, whereas Mr. Rioux stated that the appellant could work from 6 am to
midnight. With regard to the periods in which the appellant worked 15 hours a
week, the payer and the appellant contradicted each other in their telephone
conversations with Ms. Nicol; whereas the payer said that she worked 15 hours
on Fridays and Saturdays, the appellant stated that she had done these hours on
Friday, Saturday and Sunday, working 4 or 5 hours each day and a little on the
other days of the week.
[14] On the
issue of the volume of work to be done in comparison with the hours recorded in
the payroll record, I have reproduced below an excerpt from the CPT-110 report
on the nature and importance of work performed and the amount of work performed
by the appellant during the winter months:
Nature and importance of work
performed:
Whereas:
In the winter, Ms. Lucie Bacon primarily
looked after the housekeeping, whereas during the summer, in addition to
cleaning the cabins, she looked after the bar, served the guests, handled
reservations, orders, etc. The worker was the only person who looked after the
bookkeeping (manually). She took care of the payroll record and source
deductions, which took her approximately 15 minutes, since there were few
employees. She did the bookkeeping on a daily basis (5 minutes) or once a week
(15 to 20 minutes), entering the earnings based on the cash register tape.
In the winter, the payer served meals (fast food; hot
dogs, hamburgers, spaghetti) to attract customers. Mr. Réjean Rioux stated that
he was the one who cooked the meals. He admitted, however, that when there were
several customers at the same time, the worker would also help out. He was
available in the winter because there was little maintenance work to be done
outside, in contrast to the summer, when he was obliged to look after boat
rentals, maintenance of the property and the cabins.
We note that earnings for the years 1997 to 1999 are
almost as much during the months of January, February and March as during June,
July and August of the same year. The difference can be found in the area of
meals and rentals: earnings from meals are greater during the winter, whereas
earnings from rentals are greater during the summer. Bar income, however, is
comparable in both seasons.
It is difficult to establish a relationship between
the needs of the payer in terms of staff and the payer's monthly earnings.
The worker is listed in the payroll records for 12 to
13 consecutive weeks during the winter and for 23 to 30 consecutive weeks
during the summer for the years 1997 to 2000.
For the winter of 1999, Lucie Bacon and Jean-François Dumont work the same
number of hours as the previous year, whereas Andrée Lamontagne, who replaced
Ms.Hébert, works only 8 hours per week as compared to 15 hours.
Nevertheless, earnings from cabin rentals are greater during the winter of 1999
than those of the previous year. In the summer of 1998, Ms. Hébert
worked 16 hours per week for 21 weeks, while the person who was
hired during the summer of 1999 worked 10 hours per week for only 10
weeks. And here again, the income from cabin rentals was comparable for
some months. In addition, Ms. Francine Lapointe was not employed during the
months where the rental income was highest.
During the summer of 1999, during Ms. Lucie Bacon's
first 11 weeks of work, there was no employee to help her with cleaning the
cabins, as in other years, and Ms. Lucie Bacon did not have more recorded hours
of work.
In winter 2000, there were two employees, Ms. Lucie
Bacon and Ms. Francine Lapointe; we note that Mr. Jean-François Dumont was not
replaced.
It is also difficult to establish the relationship
between the needs of the payer in terms of staff and the number of cabin
rentals for certain periods.
According to the versions of Lucie Bacon and Réjean
Rioux, the main duty of Lucie Bacon during the winter was to clean the cabins
following the departure of the guests.
In the winter of 1997, the worker reported 18 hours
of work per week, whereas there are weeks in which no departures were
recorded, and others with 8 departures within the same week. The first
week of January, there was 1 departure and the worker's name does not
appear in the payroll record.
In September 1997, there were 5 departures for
the month and the worker reported 20 hours of work per week, whereas in
October, there were 12 departures in all and she reported 15 hours of
work per week.
We compared the reservations book for the first three
months of the years 1997 to 2000, with the payroll records for the same years.
We find that there is no logical consistency between the number of departures
and the hours required by the staff on duty. For example, in 1998, the payer
retained the services of Ms. Bacon and Ms. Hébert for 390 hours for a total of
22 departures, whereas in 2000, he retained the services of Ms. Bacon and Ms.
Lapointe for 290 hours for a total of 75 departures - three times more
departures and 100 fewer hours of work.
Other circumstances:
Whereas:
For 1996, Ms. Julie Hébert, the payer's
daughter-in-law, received pay totalling $9,464, which amounts to approximately
1352 hours at an hourly rate of $7. This number of hours is greater than
that worked by Ms. Lucie Bacon during an entire summer season. If these
hours are distributed during periods of business activity, i.e., 9 months out
of 12 (approximately 38 to 39 weeks), Ms. Bacon was paid for an average of 35
hours a week, in summer and winter alike. Here again, Ms. Lucie Bacon did not
have as many hours of work in the summer as in the winter.
During 1997, the payer did not retain the services of
Ms. Hébert, although she was drawing employment insurance benefits. Whereas
during 1998, Ms. Julie Hébert has 531 hours of work entered in the payroll
record. This number of hours is greater than the hours worked by the other
people who replaced her subsequently.
The question must be asked whether the payer retained
the services of people with whom he did not have an arm’s length relationship
based on the requirements for the business or the needs of the individuals
themselves.
In conclusion, the employment which is the subject of
this appeal was, during the periods at issue, influenced and significantly
shaped by the lack of an arm’s length relationship between the payer and Ms.
Lucie Bacon.
[15] A table was
filed in evidence showing the hours worked by all the payer's employees,
together with the number of departures and the income on a monthly basis, for
the three periods at issue.
[16] The task of
the appellant in this case is to establish, based on the balance of probabilities,
that the Minister exercised his discretionary power inappropriately in deciding
that, in light of all the circumstances, the payer and the appellant would not
have entered into a similar employment contract had there been an arm’s length
relationship between them. According to the Federal Court of Appeal in the
decision Canada v. Jencan Ltd. [1997] F.C.A. no 876, [1998]
1 F.C. 1987, the appellant must show that, depending on the case, the
Minister acted in bad faith or for an improper purpose or motive, failed to
take into account all the relevant circumstances, as expressly required by
sub-paragraph 3(2)c)(ii) of the Employment Insurance Act and
paragraph 5(3)b) of the Act, or took into account an irrelevant
factor.
[17] The
statement of the role played by the Minister and that which the Court must play
was reiterated by the Federal Court of Appeal in Légaré v. Canada,
[1999] F.C.A. no 878 (Q.L.). Marceau J. summarized the issues in the
following terms at paragraph 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
expresses a form of subjective element, and while this is being 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 the 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.
[18] The Federal
Court of Appeal, furthermore, restated its position in Pérusse v. Canada,
[2000] F.C.A. no 310 (Q.L.). Marceau J., referring to the passage cited above
taken from Légaré, added the following at paragraph 15:
The function of an appellate judge
is thus not simply to consider whether the Minister was right in concluding as
he did based on the factual information which commission inspectors were able
to obtain and the interpretation he or his officers may have given to it. The
judge's function is to investigate all the facts with the parties and witnesses
called to testify under oath for the first time and to consider whether the
Minister's conclusion, in this new light, still seems "reasonable"
(the word used by Parliament). The Act requires the judge to show some
deference towards the Minister's initial assessment and, as I was saying, directs
him not simply to substitute his own opinion for that of the Minister, when
there are no new facts and there is nothing to indicate that the known facts
were misunderstood. However, simply referring to the Minister's discretion is
misleading.
[19] In
exercising his discretion, the Minister concluded in this case that the
appellant's hourly rate was established on the basis of the business's ability
to pay. Counsel for the appellant, while acknowledging that there were
variations in the appellant's hourly rate, maintained that this was nonetheless
an hourly rate comparable to that found in other Quebec outfitters. The
appellant is the only one of the payer’s employees whose hourly rate was
reduced during the winter. Even if the rate paid to the appellant were comparable
to that paid by other outfitter establishments, this reduction in the hourly
rate was more readily acceptable by virtue of the lack of an arm’s length
relationship. The payer himself acknowledged that the appellant's hourly rate
was directly based on the business's ability to pay.
[20] Among the
conditions of employment, one salient point is the fact that the appellant's
hours were not recorded. The appellant received the same pay every week for 40
or 45 hours of work, depending on the period at issue, even though she worked a
great deal more than that. The evidence revealed that the appellant could work
up to 100 hours a week. Even though an attempt appears to have been made on
occasion to demonstrate that this number of hours is perhaps an exaggeration, I
am satisfied that the appellant works many hours beyond the 40 or 45 per week
for which she is paid. Counsel for the appellant maintains that the other
employees, like the appellant, had no fixed schedule and that they were called
upon to work as the business required, since weather conditions play an
important role in the operations of this type of business. Counsel also
maintains that the employees all had a guaranteed minimum number of hours when
they were called in to work.
[21] According
to the table prepared by the Appeals Officer, the employees worked every day.
The evidence has, however, revealed that, if bad weather affected operations,
the employees did not work but were paid a minimum of guaranteed hours per day.
In the case of the appellant, however, the circumstances were not the same,
since she worked more than the 40 or 45 hours a week that were guaranteed her.
In fact, she received the same pay every week, regardless of the hours actually
worked. Since her hours of work always exceeded the guaranteed minimum, she was
in a position which differed from that of the other employees, inasmuch as they
never worked hours for which they were not paid. However, they were
occasionally paid for hours not worked by reason of bad weather, which was not
the case for the appellant, or at least there is no evidence to the contrary.
[22] The
Minister in his analysis has cast doubt on the needs of the business with
regard to staff and the amount of the payer's monthly earnings. I am referring
here to the comments I reproduced above on the nature and importance of the
work performed. It is clear that, according to the report in which these
comments appear, it is difficult to establish a relationship between the work
to be performed and the staff on site during the three years covered by the
analysis. Even though it is permissible to receive pay for part of a week of
unemployment, the fact that this pay will not be deducted from benefits unless
it exceeds 25% of the amount of weekly benefit necessitates an evaluation such
as that contained in the report in order that the nature and importance of the
work can be compared.
[23] In the case
before us, the facts reveal that the compensation paid to the appellant was
based directly on the financial situation of the payer. By reason of her
collaboration with the payer and her involvement in the business, the appellant
was always available to respond to the needs of the outfitters, outside the
hours for which she was paid. Her employment, during the three periods at
issue, was undoubtedly influenced by the lack of an arm’s length relationship
between her and the payer. In fact, Mr. Rioux acknowledged during the trial
that the appellant was his partner in the business. She assisted him in
everything he did and neither he nor she could leave the outfitter’s
establishment unless the other were there. No record was kept of their hours.
Mr. Rioux testified that the appellant deserved better conditions and that a
love of nature was an essential pre-condition for agreeing to live in such a
situation. In my view, while he is undoubtedly right, such a degree of
willingness and involvement is not normally encountered in employment contracts
entered into with third parties. The economic interests of the appellant and
the payer are too closely linked.
[24] Even though
the Minister took into consideration the work performed by the appellant
throughout the year - in other words, the deposits and the bookkeeping that she
looked after - or again, without checking whether she did in fact keep the
money or not, the fact that the appellant drew her pay cheque from the business
account, he would, in my view, have reached the same conclusion.
[25] The
appellant has advanced no substantive proof that would support a conclusion on
my part that the decision of the Minister is unreasonable in the circumstances,
for the three periods at issue. I accordingly lack the authority to intervene.
[26] For these
reasons, the appeal is dismissed and the decision of the Minister is affairmed.
Signed at Ottawa, Canada, this 21st day of January, 2004.
Angers J.
Certified true translation
Colette Beaulne
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