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Citation:2003TCC529
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Date:20030819
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Docket: 2002-3037(EI)
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BETWEEN:
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MARIA STAVROPOULOS,
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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
Docket: 2002-3038(EI)
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PETER STAVROPOULOS,
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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
MacLatchy,
D.J.
[1] These
appeals were heard on common evidence on consent of the parties, on July 15,
2003, at Toronto, Ontario.
[2] The
Appellant, Peter Stavropoulos, appealed a ruling to the Minister of National
Revenue (the "Minister") for the determination of the question of
whether or not he was employed in insurable employment, while engaged by
1166207 Ontario Limited, operating as Saxony Restaurant, the Payor, for the
periods from March 4, 1996 to January 6, 1997, October 28, 1997 to
September 14, 1998 and August 3, 1999 to August 7, 2000, within the
meaning of the Employment Insurance Act (the "Act").
[3] The
Appellant, Maria Stavropoulos, appealed a ruling to the Minister for the
determination of the question of whether or not she was employed in insurable
employment, while engaged by the Payor for the periods from March 4, 1996
to October 27, 1997, September 15, 1998 to August 2, 1999 and August 8, 2000 to
September 3, 2001, within the meaning of the Act.
[4] By
letters dated May 9, 2002, the Minister informed the Appellants that it had
been determined their engagement with the Payor, during the periods in
question, was not insurable employment for the reason that they and the Payor
were not dealing with each other at arm's length, within the meaning of
paragraph 5(2)(i) of the Act.
[5] The
Appellants called their son to give evidence and provided their own testimony.
It was accepted by the Appellants that the Minister in making his decisions,
relied on certain assumptions, as follows:
a) The Payor
operates a restaurant;
b) William
Stavropoulos ("William") is the sole shareholder of the Payor;
c) William is
the Appellant's son;
d) The Appellant
was hired by the Payor to do cooking, cleaning, to serve customers and to
perform other general duties at the restaurant;
e) The Payor
also hired Peter Stavropoulos ("Peter") [Maria Stavropoulos
("Maria")] to perform similar duties as the Appellant;
f) The
Appellant [Maria] and Peter are married to each other;
g) The Appellant
[Maria] and Peter were laid off and re-hired by the Payor, on a frequent basis,
due to an alleged shortage of work;
h) Sales
reported by the Payor do not reflect any dramatic sales' fluctuations which
would support the Appellant [Maria] and Peter being dismissed for a shortage of
work;
i) The
Appellant [Maria] and Peter have been dismissed by the Appellant and re-hired
on a regular basis, after collecting the maximum employment insurance benefits
they were entitled;
j) From January
6, 1997 to September 3, 2001, the Appellant [Maria] and Peter were hired
alternately and then dismissed based on alleged shortages of work;
k) The Appellant
[Maria] and Peter were each paid a bi-weekly salary of $1,000.00, yet other
workers dealing at arm's length with the Payor were mainly paid based on the
actual hours they worked;
l) On their
applications for employment insurance benefits, both the Appellant [Maria] and
Peter denied being related to the Payor's sole shareholder;
m) the Appellants
[Maria and Peter] are not dealing with the Payor at arm's length.
[6] Section
5 of the 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;
...
(2) Insurable employment
does not include:
...
(i) employment
if the employer and employee are not dealing with each other at arm's length.
(3) For the purposes of
paragraph (2)(i),
(a) the question
of whether persons are not dealing with each other at arm's length shall be
determined in accordance with the Income Tax Act; and
(b) 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.
[7] The
Appellants are in insurable employment but are excluded by the fact that they
are related to the Payor within the meaning of the Income Tax Act and are not
to be dealing with the Payor at arm's length. However, the Minister may deem
that relationship to be at arm's length provided the provisions in paragraph 5(3)(b)
are satisfied. In an attempt to exercise his discretion in this regard the
Minister closely examined all the circumstances of the relationship and came to
the conclusion that the parties were not dealing with each other at arm's
length.
[8] Representatives
of Canada Customs and Revenue Agency and Human Resources Development Canada
attended at the restaurant of the Payor and interviewed the Appellants and the
Payor concerning their working relationship. It was indicated to them that the
Appellant, Maria Stavropoulos was Linda Poulos; this Appellant feels she
misunderstood who the representatives were by reason of her lack of clear
understanding of the English language, but as well, both Appellants used a
shortened version of their family name of "Poulos" and yet they also
made application for benefits under the Act in the names of
"Poulos". No clear explanation was presented to this Court as to why
the change of name was used. This raised questions in the minds of the
representatives because both Appellants stated they were not related to the
Payor when in fact the Payor was solely owned by their son William
Stavropoulos. The only explanation for this error was that they did not
understand that they could be related to a limited company.
[9] A
pattern appeared concerning the hiring and firing of both Appellants so that as
each acquired sufficient hours of employment to claim full compensation under
the Act, their job ended by reason of shortage of work. Yet one
Appellant was terminated just days before the other Appellant was rehired by
the Payor. There was no clear explanation for such actions of the Payor and no
financial records could support the lack of business or shortage of work as
stated in the Records of Employment filed by the Payor. The fact that Maria
Stavropoulos was subject to danger because of her hours was given as a partial
explanation.
[10] Each Appellant, when employed, was paid the same starting at $250 to
$300 per week and then rising quickly to $500 per week. Each was salaried and
not paid by the hour as one would expect from their job description. Other
employees of the Payor were paid by the hour. The explanation was that each
Appellant, when working, did much more quantity of work and worked longer hours
than other employees. There was no record kept of the hours that either
Appellant worked.
[11] The Minister considered the circumstances of the employment of the
Appellants including the remuneration paid, the terms and conditions, the
duration and the nature and importance of the work performed and he could not
reasonably 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. Thus his decisions are hereby confirmed based on the evidence heard by
this Court.
[12] The appeals are dismissed and the decisions of the Minister are hereby
confirmed.
Signed at Toronto, Ontario, this 19th day of
August 2003.
MacLatchy,
D.J.
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