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Citation: 2004TCC396
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Date: 2004xxxx
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Docket: 2003‑2676(EI)
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BETWEEN:
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FONDS D'EMPRUNT COMMUNAUTAIRE
DE LA GASPÉSIE ET DES ÎLES,
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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]
REASONS FOR JUDGMENT
Tardif J.
[1] This is an appeal from a decision dated
July 10, 2003, to the effect that the work performed by
Harold Milligan from July 21 to December 31, 2002, for
and to the benefit of Fonds d'emprunt communautaire de la Gaspésie et
des Îles, does not satisfy the conditions of a true contract of service,
primarily because an employer‑employee relationship did not exist.
[2] In support of the appealed decision, the
Minister of National Revenue (the "Minister") relied
on the following presumptions of fact:
[translation]
(a) The Appellant
is a non‑profit organization registered on July 4, 2002.
(b) The object of
the Appellant is to motivate investors to grant credit and provide guidance to
low‑income persons who have business plans.
(c) When the
Appellant was registered, the organization was under the direction of a board
of five directors, including Sonia Gagnon, common‑law spouse of
the Worker.
(d) The business
address of the Appellant was
12 A, Perron Boulevard in Caplan.
(e) This was the
Appellant’s first year of operation.
(f) The Worker
is a hard‑of‑hearing person unable to have a telephone conversation
or to work on his own.
(g) The Appellant
had hired the Worker to establish links between the English‑speaking and
the Amerindian communities (Micmac).
(h) The Worker
was hired to recruit new members. However, the Worker rarely participated in
the recruitment meetings that were held twice a month.
(i) The Worker
did errands and cleaned the premises of the Appellant.
(j) The Worker
worked with Ms. Gagnon in their residence located at 256 Rang 4
in Richmond.
(k) Nobody
recorded the hours the Appellant worked and it was difficult to ascertain the
number of hours he had worked.
(l) The Worker
was the only person who received a salary from the Appellant.
(m) The Worker was
entitled to $600 per week, for 40 hours of work at $15 per hour, but in
fact, throughout the period at issue, he only received
three $840 cheques from the Appellant, issued by Emploi‑Québec.
(n) Emploi‑Québec
granted a subsidy to the Appellant, pursuant to a job‑creation program
for persons with disabilities.
(o)
Emploi‑Québec
was supposed to contribute to the Worker’s salary for a period of one year
by paying 35% of the compensation, i.e., $840 per month.
(p) Emploi‑Québec
paid the subsidy to the Appellant on a monthly basis.
(q) In
December 2002, Emploi‑Québec stopped paying the subsidy to the
Appellant because the Appellant had failed to pay the Worker the stipulated
salary. Then Emploi‑Québec asked the Appellant to reimburse the amount of
$4,872 that Emploi‑Québec had already paid.
(r) The first
time the Worker went to the local employment insurance office, he submitted a
Record of Employment showing 800 hours of work. After being informed that
his hours were insufficient, he came back the next day with a Record of
Employment showing 920 hours of work; he needed 910 hours in order to
be eligible for employment insurance benefits.
(s) There is no
evidence that the Worker did 40 hours of work per week during the period
at issue.
(t) The Record
of Employment is not accurate with respect to the working hours reported in the
document, or with respect to the amount of compensation.
[3] Sonia Gagnon represented the Appellant at
the hearing. She admitted subparagraphs (a), (b), (d), (e), (f), (g), (i),
(l), (n), (o), (p) and (q) of Paragraph 5 and denied all the remaining
subparagraphs.
[4] At the outset, I explained to Ms. Gagnon
in detail how she should proceed. I particularly specified what she had to
demonstrate for the Appellant to discharge the burden of proof incumbent upon
it.
[5] I equally stressed the conditions that had to
be satisfied for employment to be characterized as a contract of service. The
Court frequently intervened to allow Ms. Gagnon to explain in detail the
work accomplished by Harold Milligan for and to the benefit of the Appellant,
to no avail; she affirmed repeatedly that the Worker’s main duty was that of an
accompanying attendant, then she added that he had also done some maintenance
and renovation work, delivered pamphlets and greeted people who attended
meetings that took place a rather uncertain number of times.
[6] In light of the explanations provided by
Ms. Gagnon, it was obvious that the work accomplished by
Harold Milligan could not support the claim that he worked 40 hours
per week throughout the period at issue.
[7] On the other hand, the type of work he
performed did not justify a salary of $15 per hour, particularly since the most
important tasks were accomplished by all of the other persons involved in the
operations of the Appellant, and they did so on a voluntary basis.
[8] The issue of the amount of compensation was not
resolved, in spite of the fact that Ms. Gagnon called Diane Allard as
a witness: Ms. Allard is in charge of the accounting, and is also closely
involved in the operations of the Appellant.
[9] It appears from their testimony that, in fact,
Harold Milligan only received 35% of the compensation shown on the Record
of Employment. The Appellant paid the remaining 65% of the amount entered in
the Record of Employment to third parties to finance two loans in
connection with the acquisition of two vehicles, one of them in the
name of Sonia Gagnon and the Appellant, the other in the name of the
Worker, Harold Milligan.
[10] Besides the monthly payments to finance the
vehicle loans, it seems that the Appellant also directly paid the expenses
incurred by Mr. Milligan. No details were provided and this Court
remains sceptical with respect to the persons who really benefited from the
reimbursement of expenses.
[11] Thirty‑five percent of the compensation
showing in the Record of Employment was paid in full through a subsidy issued
by Emploi‑Québec, pursuant to an undertaking in connection with a work‑integration
contract.
[12] One of the persons in charge of the program
that subsidized the Appellant, Michel Samuel, came to the hearing. He
explained that the agency decided to demand reimbursement of the amounts
subsidized during the period at issue, after noting several irregularities and
breaches of the contract.
[13] In particular, Emploi‑Québec criticized
the Appellant for failing to keep reliable log books; for being unable to
specify the type of work accomplished by Harold Milligan; and, most
importantly, for failing to pay the Worker the agreed salary of $600 per
week; and for only paying the Worker 35% of this amount, namely the amount of
the subsidy.
[14] In light of the evidence submitted by
Sonia Gagnon and Diane Allard— Harold Milligan did not testify—it is
clear that there was no real contract of service, just a scheme devised by
Ms. Gagnon with the sole purpose of rendering Harold Milligan
eligible for employment insurance benefits.
[15] The evidence submitted by the Respondent
clarified the image resulting from the testimonies of Ms. Gagnon and
Ms. Allard.
[16] First of all, the Respondent demonstrated that
the Appellant applied for a grant under a work program promoting the
integration of certain persons into the workforce. In the space for the
position of the employee, the Appellant, "Le Fonds d'emprunt
communautaire de la Gaspésie et des Îles", then represented by
Diane Allard, claimed that the position offered to Harold Milligan
was that of a coordinator‑recruiter.
[17] However, at the time, Harold Milligan, a
unilingual Anglophone was significantly hard‑of‑hearing. Moreover,
Lucien Gignac, investigator with Human Resources
Development Canada, noticed that besides his auditory problems,
Harold Milligan had a serious speech impediment and that it was very
difficult to understand him when he spoke.
[18] The Court did not have the opportunity to verify
anything in this respect, since Ms. Gagnon, who is obviously responsible
for the whole scheme, failed to call Mr. Milligan to testify.
[19] Following the breach of contract by Emploi‑Québec,
a termination of employment was issued to Harold Milligan, showing that he
had worked 800 hours. When Mr. Milligan filed his termination of
employment, to obtain employment insurance benefits, Ms. Gagnon
accompanied him. They were told then that he needed 920 hours to qualify
for employment insurance benefits. A few days later, they both came back
with a new Record of Employment, this time showing 920 hours.
[20] Diane Allard, who was the agent for the
Appellant when the grant application was made, had indicated that
Harold Milligan was to work as a coordinator‑recruiter. However, in
a letter dated April 2, 2003, she wrote the following to the
Canada Customs and Revenue Agency:
[translation]
. . .
This is to challenge the
decision issued on March 28, 2003, by Michel Poirier.
We disagree with the points
that you have established regarding his remuneration and the choice of the
method used to perform his work.
Harold Milligan is
a hard‑of‑hearing, unilingual Anglophone; he could not work on his
own. He
was always accompanied by a member of our organization who would provide him
with all the necessary supervision for the performance of his tasks. Thus he
had no choice with respect to the method he used to perform his work.
As to the evidence
concerning the payment of his salary, we have already sent you a copy of our
general ledger concerning salary transfers, with respect to
Harold Milligan’s work with Fonds d'emprunt communautaire de la
Gaspésie et des Îles. We also include a statutory enactment that explains
that employee benefits are taxable, and therefore linked to the employee’s
salary.
We sent you a copy of
the salary agreement that the Board voted on in July 2002. You will note
that the purchase of the vehicle for Mr. Milligan is solely for personal
reasons. Mr. Milligan must always be accompanied by a volunteer during
work hours and should not have to use his pick‑up truck for work purposes.
The Fonds d'emprunt
communautaire de la Gaspésie et des Îles has chosen to make payments in
connection with the purchase and maintenance of Mr. Milligan’s pick‑up
truck in order to help him manage his income and to ensure that payments are
made.
Please find enclosed our
2002 Financial Statements, in which you will note that we have been
funded to pay Mr. Milligan’s salary.
We hope to receive a
favourable answer to our request that Harold Milligan be found eligible
for employment insurance.
Sincerely,
Diane Allard
. . .
(Emphasis added)
[21] A few months later, on July 20, 2003,
Sonia Gagnon appealed the decision through a letter that reads as follows:
[translation]
. . .
I would like to appeal
the decision that Harold Milligan is not eligible for employment insurance
for his work as a coordinator‑researcher with our organization,
Le Fonds d'emprunt communautaire de la Gaspésie et des Îles, from
July 21, 2002 to December 31, 2002.
The decision is dated
July 10, 2003, and Sonia Gagnon will represent our organization
in defence of the questions concerning the employer‑employee
relationship, as well as the contract of service.
The reasons for our
appeal are that Mr. Milligan was hired by an external employment
service promoting the return of persons with disabilities to the workplace. We
needed a representative of the Anglophone community to help us set up a
committee for our organization. Mr. Milligan was always accompanied by a
member of our team when he worked for our organization.
. . .
(Emphasis added)
[22] The persons in charge of the Appellant’s
operations then submitted a very different task description. At the hearing,
Harold Milligan was described as an accompanying attendant, a position
that is not consistent with any of the duties previously assigned to him. Not
only was he not a contact person, but he also was extremely dependent.
[23] The Appellant had the onus of proof. We never ascertained
the true nature of the work accomplished by Harold Milligan. Moreover,
given the various inconsistencies in the evidence, I strongly doubt the
veracity of the explanations that have been submitted. The fact that
Harold Milligan did not appear before the Court did not improve the
quality of already very weak evidence.
[24] A true contract of service must result from a
clearly defined workload, accomplished for reasonable and appropriate
remuneration consistent with the nature of the work, in the context of an
employer‑employee relationship.
[25] The Worker must be subject to the supervisory
power of the Employer. Moreover, the employment must be real, useful and
productive, and its parameters must be determined primarily as a function of
economic concerns. A real contract of service may arise out of humanistic,
community or social concerns; however, efficiency and the accomplishment of
actual objectives should not be completely disregarded.
[26] In this case, the employment at issue was not
structured as a function of a particular objective, but basically for the
purpose of obtaining a grant from Emploi‑Québec. The payment of the grant
was conditional upon proper compliance with the specific terms stipulated in
the contract, particularly those requiring strict supervision and those
requiring that all pertinent data on the quality and the quantity of the work
be properly recorded.
[27] Moreover, the Worker was to receive actual
compensation for his work.
[28] Seeking to obtain grants is in itself a
legitimate objective and it may help accomplish beneficial projects and many
activities. When an employee is to be hired in the context of such a project,
for specific activities, the planned or contemplated work must be
well described and well defined theoretically, and the work must be
performed in a way that facilitates the assessment of the quality and the
quantity of the Worker’s accomplishments.
[29] The employment must be compensated with an
adequate salary that is actually paid to the Worker and that suits the nature
of the tasks to be accomplished and prevailing economic realities.
[30] The performance of useful and necessary work to
meet specific expectations must be supervised, permitting the Employer to
intervene at any time.
[31] I have no doubt that Harold Milligan did
provide some services; however, the services provided by Harold Milligan
did not justify the compensation that Ms. Gagnon and Ms. Allard claim
to have paid to him. Moreover, the balance of probabilities is inconsistent with
the allegations submitted by Ms. Gagnon, since it is clear that Milligan
was only paid the equivalent of the grant, or 35% of the alleged salary.
[32] The remaining 65% was used to pay instalments
for vehicle purchases, one of which belonging to the Appellant and to
Sonia Gagnon, as well as for the reimbursement of various expenses. One
thing is certain: Mr. Milligan never did see a large portion of the salary
stipulated in the grant contract. Clearly, the Appellant, not
Harold Milligan, benefited from a major portion of the 65%.
[33] The latter probably agreed to all these
conditions hoping to receive employment insurance benefits based on a salary of
$600 per week, an amount certainly greater than the 35% he received during
the alleged period of employment. Mr. Milligan did not testify, and the
Court was unable to ascertain whether he was an accomplice or a victim of the
scheme.
[34] The task description of the position at issue
was basically drafted to comply with the requirements of the grant program, and
not with respect to a purpose or objective.
[35] While the position was presented and submitted
as that of a coordinator‑recruiter, the Worker has, in fact, not
performed any duties that pertain to such employment, for the simple reason
that he does not have the skills or the qualifications to do so.
[36] He was supposed to receive a $15 per hour
salary, for 40 hours per week, for a period of one year. According to
the facts, he was only paid the subsidized portion of the theoretical salary of
$600 per week, or 35%; the remaining 65% was directly used for the benefit
of the Appellant.
[37] In conclusion, the work that was performed was
neither significant nor useful; it was imaginary, doctored and moulded to meet
the requirements of a grant program. The grant that was supposed to benefit a
physically challenged worker within the framework of activities, the purpose of
which was to contribute to the betterment of various ethnic communities in the
Gaspé, turned out to be a false scheme for the benefit of the Appellant at the
Worker’s expense.
[38] The Appellant had the onus of proof. Not only
did the Appellant fail to establish that the employment at issue was performed
pursuant to a true contract of service, but rather it made it clear that the grant
was obtained on the basis of false and misleading representations.
[39] The Appellant, clearly directed and controlled
by Sonia Gagnon and Diane Allard, has implemented some initiatives
among various communities located in the greater Gaspé area. They then enlisted
the aid of Harold Milligan, in the capacity of a coordinator initially,
and then as an accompanying attendant. In fact, he has probably acted more in
the capacity of a chauffeur, since most of the members of the Board of Trustees
did not have a vehicle and they needed to travel through several regional
municipalities spaced at great distances from each other.
[40] The Appellant did not discharge the burden of
proof incumbent upon it. Its appeal is dismissed.
Signed at Ottawa, Canada, this XX day of June 2004.
Tardif J.
Translation certified true
on this 27th
day of September 2004.
Ingrid B. Miranda, Translator
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