[OFFICIAL ENGLISH TRANSLATION]
Date: 20010718
Docket: 2000-2493(EI)
BETWEEN:
PLANCHERS DE BOIS FRANC 2000 (LAVAL) INC.,
Appellant,
and
THE MINISTER OF NATIONAL REVENUE,
Respondent,
and
JOHANNE LEPAGE,
Intervenor.
REASONS FOR JUDGMENT
Somers, D.J.T.C.C.
[1] This appeal was heard at
Montréal, Quebec, on May 28, 2001.
[2] The appellant is appealing from
the decision of the Minister of National Revenue (the
"Minister") according to which the employment held by
Johanne Lepage, the worker, with the appellant during the
period in issue, from January 1 to November 10, 1999,
was insurable on the ground that the appellant and the worker
were bound by a contract of service within the meaning of the
Employment Insurance Act (the "Act").
[3] On November 10, 1999, an
authorized officer of the Canada Customs and Revenue Agency
informed the appellant that the worker had held insurable
employment within the meaning of the Act while in its
service during the period from January 1, 1996, to
December 31, 1998. The officer further informed the
appellant that, since it had not sent its request before
June 30, 1999, no right of appeal to the Minister was
granted for that period (Exhibit I-3).
[4] At the hearing, the worker
admitted that she had not appealed from the decision, respecting
the periods prior to 1999, ruling that her employment was
insurable since it had been held under a contract of service. In
1995, the worker received unemployment insurance benefits while
on maternity leave.
[5] The Court has no jurisdiction
respecting the periods prior to January 1, 1999, since the
Minister did not render any decision concerning those
periods.
[6] The Court must rule on the
insurability of the employment solely for the period from
January 1 to December 10, 1999. In another letter
(Exhibit I-2) dated November 10, 1999, an officer
of the Canada Customs and Revenue Agency informed the appellant
that the worker's employment was insurable. That letter reads
in part as follows:
[TRANSLATION]
. . . Although her employment with you was held under a
contract of service, you and Johanne Lepage were not dealing
with each other at arm's length for the purposes of the
Employment Insurance Act. Despite this fact, having regard to all
the circumstances of the employment, we find that you and
Johanne Lepage would have entered into a substantially
similar contract of employment if you had been dealing with each
other at arm's length, and pursuant to paragraph 5(3)(b)
of the Employment Insurance Act, you and Johanne Lepage are
deemed to be dealing with each other at arm's length for the
purposes of the Employment Insurance Act.
[7] In his decision dated
April 13, 2000, the Minister found that the worker's
employment was insurable since it met the requirements of a
contract of service.
[8] Subsection 5(1) 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;
...
[9] Subsections 5(2) and (3) of the
Act read in part:
5(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.
[10] Section 251 of the Income Tax
Act reads in part as follows:
251. Arm's length.
(1) For the purposes of
this Act,
(a) related
persons shall be deemed not to deal with each other at arm's
length; and
...
(2)
Definition of "related persons". For the purpose of
this Act, "related persons", or persons related to each
other, are
(a)
individuals connected by blood relationship, marriage or
adoption;
...
[11] The onus of proof is on the appellant.
It has to show on the balance of evidence that the Minister's
decision is unfounded in fact and in law. Each case stands on its
own merits.
[12] In making his decision, the Minister
relied on the following facts which were either admitted or
denied by the Appellant:
[TRANSLATION]
(a) the appellant
was incorporated on February 21, 1989; (admitted)
(b) during the
period in issue, the appellant's shareholders were:
Maurice
Lepage
55% of the voting shares
Suzanne
René
45% of the voting shares; (admitted)
(c) the worker is
Maurice Lepage's daughter; (admitted)
(d) the appellant
operated a year-round retail hardwood flooring and stairway sales
business; (admitted)
(e) the appellant
had one sales office in Laval and another in Longueuil;
(admitted)
(f) the worker
had worked for the appellant's business for eight years;
(admitted)
(g) the worker was
general manager of the Laval office; (denied)
(h) the worker's
duties were to do all the accounting and to manage the staff,
purchases and inventories; (denied)
(i) the worker
worked at the appellant's store; (denied)
(j) the worker
had a regular schedule of 40 to 50 hours a week which
corresponded to the store's business hours; (denied)
(k) all the
equipment used by the worker in performing her duties belonged to
the appellant; (admitted)
(l) the worker
incurred no expenses in performing her duties; (admitted)
(m) the worker received a
fixed salary of $825 every two weeks paid by direct deposit;
(admitted)
(n) the worker
invested nothing and did not stand surety for the appellant;
(admitted)
(o) the worker had
no chance of profit or risk of loss; (admitted)
(p) the worker's
work was integrated into the appellant's activities.
(denied)
[13] According to the notice of appeal
dated May 31, 2000, the appellant claims a right of appeal
for the period from January 1, 1996, to December 31,
1998, whereas, on November 10, 1999, an officer of the
Canada Customs and Revenue Agency informed the appellant
(Exhibit I-3) that, since it had not sent its request
before June 30, 1999, no right of appeal would be granted
for that period.
[14] Subsections 90(1) and (2) of
the Act read in part as follows:
(1) An employer, an employee, a person claiming to be an
employer or an employee or the Commission may request an officer
of the Department of National Revenue authorized by the Minister
to make a ruling on any of the following questions:
...
(2) The Commission may request a ruling at any time, but
a request by any other person must be made before the June 30
following the year to which the question relates.
[15] In Lamarre v. Canada (Minister of
National Revenue - M.N.R.), [1998] F.C.J. No. 831, the
Federal Court of Appeal held as follows:
There is no question, ever since this Court's decision in
Vaillancourt, [(Canada (A.G.) v. Vaillancourt, [1992] F.C.J. No.
447)] that the 90-day time limit set by subsection 70(1) of the
Unemployment Insurance Act for an appeal from a decision of the
Minister is a strict time limit which the Tax Court of Canada is
unable to extend.
[16] In view of the strict time limit, this
Court can only rule on the period from January 1 to
November 10, 1999.
[17] Maurice Lepage, the worker's
father, testified at the hearing of the appeal. He stated that
the worker's employment was not insurable because he and the
worker were not dealing with each other at arm's length
during the period in issue and the worker would not have enjoyed
similar working conditions if they had been dealing with each
other at arm's length.
[18] Maurice Lepage testified that the
worker had been the manager of the Laval and Longueuil offices
for eight years. Her duties consisted in doing the
accounting, managing personnel and making purchases and sales.
The worker also managed inventory-taking and coordinated the
schedules of six or seven seasonal employees.
[19] The worker worked both in and outside
the store, that is, she could do the accounting at home in the
evenings, on weekends and even during her holidays, or after her
regular hours of work, without being remunerated for overtime.
According to the witness, the worker regularly worked
50 hours a week. The payer provided the worker with a
vehicle for the needs of the company and for her personal
needs.
[20] According to Maurice Lepage, the
worker's responsibilities increased over the years. Her
salary was set at $21,000 a year and she received that same
salary during both peak and slow periods. A certain
Mr. Blouin, a sales clerk, received a salary of $26,000,
even though he had fewer responsibilities than the worker.
According to Maurice Lepage, given her responsibilities, the
worker should receive $10,000 to $15,000 more per year.
[21] The worker corroborated her
father's testimony. She stated that her responsibilities had
increased over the years and admitted that she had received
unemployment insurance benefits during her maternity leave in
1995. She also admitted that she had not exercised her right of
appeal for the previous years.
[22] The evidence showed that there was a
contract of service between the appellant and the worker during
the period from January 1 to November 10, 1999. The
Minister did not rule on the working conditions or on the
non-arm's length dealing between the parties.
[23] It should be noted that Mr. Blouin
enjoyed more favourable working conditions than the worker. The
worker also worked at home in the evenings, on weekends and even
during her holidays without being remunerated.
[24] It is reasonable to conclude that the
worker would not have been hired on the same working conditions
if she had been dealing with the appellant at arm's length.
Having regard to all the circumstances, the Court finds that the
worker did not hold insurable employment within the meaning of
paragraph 5(2)(i) of the Act since she and the
appellant were not dealing with each other at arm's
length.
[25] Accordingly, the appeal is allowed and
the Minister's decision is varied on the basis that the
worker did not hold insurable employment during the period from
January 1 to November 10, 1999.
Signed at Ottawa, Canada, this 18th day of July 2001.
D.J.T.C.C.
Translation certified true
on this 20th day of January 2003.
Sophie Debbané, Revisor
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