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Citation: 2003TCC401
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Date: 20030625
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Docket: 2002‑3531(EI)
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BETWEEN:
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JEAN‑MATHIEU
ROY,
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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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[OFFICIAL ENGLISH
TRANSLATION]
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REASONS FOR JUDGMENT
Somers, D.J.T.C.C.
[1] This appeal was
heard at Québec, Quebec, on May 8, 2003.
[2] The appellant
institutes an appeal from the decision of the Minister of National Revenue (the
"Minister") according to which the employment held with 9099‑4047
Québec Inc., the payer, during the period in issue, from January 1 to
July 21, 2001, was not insurable because it did not meet the requirements
of a contract of service; there was no employer-employee relationship between
the appellant and the payer.
[3] Subsection 5(1) of the Employment
Insurance Act reads in part as follows:
5.(1) Subject to subsection (2), insurable employment is
(a) employment in Canada by one or more
employers, under any express or implied contract of service or apprenticeship,
written or oral, whether the earnings of the employed person are received from
the employer or some other person and whether the earnings are calculated by
time or by the piece, or partly by time and partly by the piece, or otherwise;
[…]
[4] The burden of
proof is on the appellant. He has to show on a preponderance of proof that the
Minister’s decision is unfounded in fact and in law. Each case stands on its
own merits.
[5] In making his
decision, the Minister relied on the following assumptions of fact, which were
admitted or denied by the appellant:
[TRANSLATION]
(a) the
payer was incorporated on January 1, 2001; (admitted)
(b) the
payer operated a Web site creation business; (denied)
(c) the
payer operated a business under the trade name "Mindlink Interactif";
(admitted)
(d) the
shareholders of the payer were: (admitted)
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Julien Saradet
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1 voting
share,
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Hugues Naud
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1 voting
share,
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the
appellant
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1 voting
share;
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(e) the
shareholders paid nothing for their shares and made no financial investment in
the payer; (denied)
(f) no
meeting of shareholders or directors was entered in the payer's records;
(denied)
(g) the
payer's monthly income was as follows: (admitted)
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January
2001
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$15,451.33
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February
2001
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$5,154.98
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March 2001
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$13,816.45
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April 2001
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$10,221.70
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May 2001
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$13,244.92
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June 2001
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$7,368.10
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July 2001
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$7,451.17
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August 2001
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$6,554.77
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September
2001
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$6,857.15
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October
2001
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$10,961.84
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November
2001
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$13,467.06
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December
2001
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$5,324.92
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January
2002
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$5,293.18
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February
2002
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$2,435.56
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March 2002
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$4,067.89
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(h) the
three shareholders were the payer's only employees; (admitted)
(i) the
appellant was responsible for marketing; (denied)
(j) the
appellant's duties were to sell advertising for the sites once they were
created; (denied)
(k) Hugues Naud
was the Web page creator; (denied)
(l) Hugues Naud
does not appear in the payer's payroll journal before June 2001; (admitted)
(m) Julien Saradet
was also an advertising salesman; (denied)
(n) each
of the shareholders worked at home with his own personal computer; (admitted)
(o) the
appellant had an uncontrolled, variable schedule; (denied)
(p) according
to the payer's payroll journal, only the appellant worked in January 2001, for
a total of only five hours; (admitted)
(q) according
to the payroll journal, there were no employees in August 2001; (admitted)
(r) on
May 16, 2002, Hugues Naud stated in a declaration to an agent of the
respondent that each of the three shareholders had volunteered time in the
business; (denied)
(s) on
August 9, 2001, the payer issued a record of employment to the appellant
for the period starting on January 1 and ending on July 21, 2001,
which showed 1,072.30 insurable hours and total insurable earnings of
$29,662.00; (admitted)
(t) the
record of employment is not consistent with the actual situation with regard to
the hours and periods actually worked by the appellant. (denied)
[6] The appellant
alone testified in support of his appeal. The payer was incorporated on
January 1, 2001, and operated what the appellant called a Web site
creation business; 25 percent of the time was devoted to creation and
75 percent to marketing.
[7] Three to six
months before the business was incorporated, the principals operated under the
name "Mindlink Interactif". Upon incorporation of the payer, the
shareholders were Julien Saradet, Hugues Naud and the appellant, each
holding one voting share.
[8] The appellant
admitted that the shareholders had made no financial investment in the
business, but that the investment was made instead in time, which, he said, had
been considerable.
[9] The appellant
explained that he had held a number of shareholder meetings, one or two a week,
which were not entered in the payer's records.
[10] The three
shareholders were the payer's only employees. Their efforts generated monthly
income as indicated in subparagraph 5(g) of the Reply to the Notice of
Appeal.
[11] The appellant
mentioned that he was responsible for marketing and creation and that he was
also a programmer. The appellant planned future projects and shareholder
meetings. He stated that there was no advertising, but that he had started up
the sites created.
[12] Hugues Naud
was a graphics designer and the appellant was a programmer together with
Julien Saradet. Hugues Naud does not appear in the payer's payroll
journal prior to June 2001. Each of the shareholders worked from his home with
his own computer.
[13] The appellant
testified that his hours of work had varied based on his computer engineering
courses, which were given in the afternoons; he mainly worked in the mornings
and evenings. He added that he had been controlled by Julien Saradet since
they had worked together.
[14] On August 9,
2001, the payer issued a record of employment to the appellant (Exhibit I‑2),
which was signed by accountant Eric Morin for the period in issue and
which showed 1,072.30 insurable hours and total insurable earnings of
$29,662.00.
[15] The appellant
explained that, in his opinion, attending shareholder meetings was not real
work, but rather volunteer work.
[16] The facts stated
above are the evidence brought by the appellant.
[17] In
cross-examination, the appellant explained that he had taken 15 to
19 hours of computer engineering courses a week until the end of April
2001. Those courses included team lab periods and five to 10 hours of
study in addition to preparation.
[18] He added that the
hours he allocated to his work for the payer had affected his studies, as a
result of which he had failed his academic year.
[19] The appellant and
Julien Saradet lived in the Québec region, whereas Hugues Naud lived
in the Montréal area.
[20] The payer created
adult Web sites and received a percentage of the contract amounts or a lump sum
amount.
[21] Jacques Dubé,
an investigator, met the appellant on October 23, 2001, and obtained a
statutory declaration (Exhibit I‑1). In that declaration, the
appellant admitted that his salary varied with the payer's income and that he
was paid by cheque every two weeks.
[22] The appellant told
the investigator that the salary was determined by the person who obtained the
contract with a third party: the income was thus shared with the person who
obtained the contract and the person who performed the contract. However, it
was the person who obtained the contract who determined how the amounts would
be shared.
[23] According to the
payroll record, which was filed as Exhibit I‑3, no salary was paid
for January 2001, whereas the record of employment filed as Exhibit I‑2
shows that the appellant's first working day was January 1, 2001. Hours of
work were entered in the payroll record for all months except January 2001.
[24] The hours worked,
amounts paid and remuneration rate in the payroll record vary. According to the
appellant's declaration, some of the amounts entered in that record are not
related to salary. He also admitted that no one controlled the hours of work.
[25] Denis Hamel,
an appeals officer with the Canada Customs and Revenue Agency, testified at the
hearing and filed his report as Exhibit I‑4. The officer had had
telephone conversations with Eric Morin, Julien Saradet and
Hugues Naud.
[26] He stated that the
accountant, Eric Morin, had told him that no salary had been paid in
January 2001 because there was no income. He said that the shareholders had
done some unpaid work. He added that the shareholders' salaries had been
determined based on the income generated by the payer.
[27] It should be noted
that the appellant's last day of work was July 21, 2001, whereas the payer
continued receiving income after that date.
[28] According to the
accountant, the income was as stated in subparagraph 5(g) of the Reply to
the Notice of Appeal.
[29] The workers,
including the appellant, could be absent without permission and worked from
their homes. The appellant and Julien Saradet lived in the Québec region,
Hugues Naud in the Montréal area; control was more a control of result.
The accountant said there were no administrative office records.
[30] The appeals
officer spoke to Julien Saradet on May 15, 2002, and the latter told
him that the three workers had worked together in 2000.
[31] Julien Saradet
declared that he had worked 35 to 40 hours a week and had occasionally
worked overtime. A normal working day started at 9:00 or 10:00 a.m. and
ended between 5:00 and 6:00 p.m., Monday to Friday. The remuneration was
decided upon based on what each person could generate in the way of revenue.
[32] Julien Saradet
told the appeals officer that he might have worked on a volunteer basis in
early January 2001.
[33] The appeals
officer referred Julien Saradet to the appellant's statutory declaration,
which stated that the income went to the person who had obtained the contract,
whereas he, Julien Saradet, asserted that the appellant "moved things
along faster, so his earnings were higher than his".
[34] He noted, among
other things, that Hugues Naud had told him in conversation, "It
isn't important to know whether a person works from what time to what time. The
important thing is to try to start up the company."
[35] Control is an
essential test in determining a relationship of subordination. The degree of
control varies with the circumstances.
[36] In the case at
bar, the head office existed in form alone. There were no administrative office
meetings to control the work performed.
[37] The appellant's
hours of work were neither determined nor controlled. None of the workers was
aware of the hours worked by the others. Furthermore, the salary was determined
by the income generated by the payer and therefore varied. The person who
obtained the contract with the third party determined how the amounts obtained
would be shared with the others.
[38] There was no
relationship of subordination; there was more a control of result.
[39] Each of the
workers worked from his home, with his own computer; the tools therefore
belonged to each worker.
[40] The workers had a
chance of profit: more contracts meant more income. Moreover, the evidence
showed that the appellant had received more income than the others because he
worked more quickly.
[41] As to integration
into the company's operations, it appears that each worker acted independently
of the others and of the company.
[42] For the
aforementioned reasons, the appellant did not hold insurable employment during
the period in issue, since that employment did not meet the requirements of a
genuine contract of service.
[43] The appeal is
dismissed.
Signed at Ottawa, Canada, this 25th day
of June 2003.
D.J.T.C.C.
Translation certified true
on this 3rd day of February 2004.
John March, Translator
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