|
Citation:2003TCC571
|
|
Date: 20031003
|
|
Docket:2002-2828(EI)
|
|
BETWEEN:
|
|
ROSE FRANCIS,
|
|
Appellant,
|
|
and
|
|
|
|
THE MINISTER OF NATIONAL REVENUE,
|
|
Respondent,
and
893134 ONTARIO INC.,
Intervenor.
Docket: 2002-2830(EI)
AND BETWEEN:
893134 ONTARIO INC.,
Appellant,
and
THE MINISTER OF NATIONAL REVENUE,
Respondent,
and
ROSE FRANCIS,
Intervenor.
|
REASONS FOR JUDGMENT
Woods J.
[1] These appeals were instituted as a result of a determination by the
Minister of National Revenue (the "Minister") that Mrs. Rose Francis
was not engaged in insurable employment for purposes of the Employment
Insurance Act, S.C. 1996, c. 23 (the "Act"). The ground
for this determination was that the terms of Mrs. Francis' employment were
not substantially similar to those that would be entered into by arm's length
persons.
[2] The appeals by Mrs. Francis and 893134 Ontario Inc. were heard
together on common evidence.
Facts
[3] Mrs. Francis' husband, Francois Francis, is the owner of a
corporation that carries on business as a grocery wholesaler under the name of
Mega Food Distributors. Mrs. Francis worked as a bookkeeper for the corporation
beginning February, 2000.
[4] Prior
to February, 2000, the bookkeeper for Mega Food
Distributors was an arm's length individual recommended by a firm of chartered
accountants. This person worked approximately 11 hours per week and charged $21
per hour for her services, subject to small courtesy discounts. Mr. Francis
testified that this bookkeeper was let go because her work was unsatisfactory
and she was replaced by Mrs. Francis. Mr. Francis testified that Mrs. Francis
worked 50 hours per week at a rate of $12 per hour. She opened the premises at
7:00 a.m. and stayed until 5:00 p.m. five days each week.
[5] Mrs. Francis had two maternity leaves while employed by Mega Food
Distributors. The first maternity leave was for six months and during this time
she was replaced by her sister-in-law. Mrs. Francis' sister-in-law initially
worked approximately ten hours per week because she was also working at Casino
Windsor. According to Mr. Francis' testimony, his sister started working 50
hours per week with Mega Food Distributors as Mrs. Francis had done once
her employment at Casino Windsor ended.
[6] Mrs.
Francis' second maternity leave was for one year and
during this time the bookkeeping was performed by an unrelated individual named
Mr. Aman. Mr. Aman attended school and also performed bookkeeping services for
various businesses. Prior to his replacing Mrs. Francis, Mr. Aman was given
office space at Mega Food Distributors in exchange for reviewing the company's
accounting records. Mr. Francis testified that, during his wife's second
maternity leave, Mr. Aman took on these additional duties and worked
approximately 50 hours per week as bookkeeper for Mega Food Distributors. Mr.
Francis stated that Mr. Aman was willing to do this so that he could learn
on the job and that Mr. Aman had spare time because the bookkeeping services
for other companies were not time consuming.
[7] The Minister determined that Mrs. Francis was not engaged in
insurable employment because it
could not reasonably be concluded that the employer, 893134 Ontario Inc., would
have paid an unrelated person a similar amount for the same work.
Issue
[8] The issue is whether it is reasonable for the Minister to conclude
that Mrs. Francis
would not have entered into a substantially similar contract of employment if
she had been dealing at arm's length with her employer.
Statutory
Provisions
[9] Paragraphs
5(2)(i) and 5(3)(b) of the Act provide:
(2) Excluded employment – Insurable
employment does not include ...
(i) employment if the employer
and employee are not dealing with each other at arm's length.
(3) Arm's length dealing – For the
purposes of paragraph (2)(i), ...
(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.
Analysis
[10] The effect of paragraph 5(3)(b) of the Act is to allow
employees who are related to their employers to be engaged in insurable employment
if the Minister is satisfied that the terms of employment are substantially
similar to what they would be if the parties were dealing at arm's length. In
this case, the Minister was not so satisfied.
[11] The jurisdiction of the Court to interfere with the Minister's
decision has been set out in several decisions by the Federal Court of Appeal. For example, Légaré v. R. describes the role of the Court as follows:
[4] … 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.
[12] At the hearing counsel for the Crown did
not attempt to justify the Minister's decision based on the original ground for
the determination which was that Mrs. Francis' hourly rate would not be paid to
an arm's length person. Instead, counsel submitted that an arm's length person
would not have spent 50 hours per week performing bookkeeping duties for this
business.
[13] I accept Mr. Francis' testimony that the first bookkeeper, who worked
about 11 hours per week, did an unsatisfactory job and that the bookkeeping
required more than 11 hours per week. However, I am not satisfied that this
business required a bookkeeper to work 50 hours per week. First, there is a
vast difference between 11 hours, the time spent by the first bookkeeper, and
50 hours, the time reputedly spent by Mrs. Francis and her sister-in-law.
Secondly, I find that Mr. Francis' testimony with respect to the terms of
employment of the other bookkeeper, Mr. Aman, is not plausible. According to Mr. Francis, Mr. Aman worked 50 hours per week for no
additional remuneration. This arrangement allegedly continued for a lengthy
period, one year. In my view this testimony with respect to Mr. Aman is
improbable.
[14] Accordingly, it has not been demonstrated that
Mega Food Distributors would engage an arm's length person to work 50 hours per
week in a bookkeeping function. In these circumstances, I find that the
Minister's decision was reasonable.
[15] For the foregoing reasons, the
appeals are dismissed and the determination that Rose Francis did not engage in
insurable employment is confirmed.
Signed at Ottawa, Canada, this 3rd day of October, 2003.
J.M.
Woods J.
Email this Content