REASONS
FOR JUDGMENT
V.A. Miller J.
[1]
The issue in this appeal is whether the
Appellant was engaged in insurable employment during the period August 18, 2014
to April 3, 2015 (the “Period”) when she performed administrative services for
Tristan Legare (the “Payer”).
[2]
The Appellant and the Payer are spouses of each
other and the Minister of National Revenue (the “Minister”) determined that the
Appellant’s employment was not insurable because the parties were not dealing
with each other at arm’s length in accordance with paragraphs 5(2)(i)
and 5(3)(b) of the Employment Insurance Act (the “Act”).
[3]
The Appellant was the only witness at the
hearing. In her testimony, she agreed with most of assumptions relied on by the
Minister and I will summarize those assumptions and her testimony in the
following paragraphs.
Facts
[4]
The Payer operated a small carpentry and
construction business as a sole-proprietorship under the name Birch Point
Contracting (the “Business”). He started this Business in May 2014 and it
operated year-round. The Business specialized in renovating kitchens and
bathrooms and constructing patios and decks.
[5]
The Payer hired two workers to assist him with
the construction Business – his father-in-law and an unrelated worker. He
engaged the Appellant, his spouse, to perform office administration duties for
the Business. Those duties included (i) running errands; (ii) maintaining the
books and records; (iii) tracking income and paying expenses; (iv) processing
the payroll; and (v) making the bank deposits for the Business. The Appellant
had no prior experience as a bookkeeper but her brother is an accountant and
she was able to consult him concerning her duties.
[6]
The Appellant performed her duties from her
home. She had no set schedule and she worked around her children’s schedules
and her other responsibilities. The Appellant agreed that she usually completed
most of her duties on Tuesdays when her 2 year old child was at day-care.
[7]
The Appellant worked for the Payer from May 2014
to July 2014 without pay. She performed these same duties for the Payer from
August18, 2014 to April 3, 2015 and she was paid $12/per hour for a 20 hour
work week.
[8]
The Appellant stated that she did not always
work 20 hours each week but she did work 40 hours every two weeks.
[9]
The Minister assumed that neither the Appellant
nor the Payer kept track of the hours that the Appellant worked. However, the
Appellant testified that she kept track of her hours on a calendar and she
transferred the number of hours to a timesheet each month. To corroborate her testimony,
she tendered two timesheets for the month of January. She stated that she had
destroyed the calendar.
[10]
All of the workers were paid on a bi-weekly
basis by direct deposit. The construction workers had their pay deposited into
their personal bank accounts. Whereas, the Appellant’s pay was included with
the Payer’s earnings and deposited into the Payer’s personal bank account.
[11]
The Appellant ceased working for the Payer on
April 3, 2015 to go on maternity leave. Her baby was born on April 7, 2015.
[12]
After April 3, 2015, the Payer started to
complete the Appellant’s duties. However, he found that he could not complete
both the administrative and the construction work and the Appellant began to
perform her duties again in May 2015. She again worked 20 hours a week from May
2015 to April 3, 2016. It was her evidence that she was not paid for this
period because she was on maternity leave. She started to get paid again after
April 3, 2016.
[13]
The Appellant stated that she was contacted by
an appeals officer from the Canada Revenue Agency who asked her questions about
her claim for employment insurance benefits. The appeals officer told her that
she could work for the Payer while she was on maternity leave.
Law
[14]
The relevant statutory provisions of the Act
read:
5(2) Insurable
employment does not include
(i) employment if the employer and employee are not dealing
with each other at arm’s length.
5(3) 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.
[15]
In Birkland v Minister of National Revenue,
2005 TCC 291, Bowie J. reviewed the various decisions from the Federal Court of
Appeal that discussed this court’s role in an appeal pursuant to the above
provisions. He stated his understanding of the present state of the law as
follows:
This Court's
role, as I understand it now, following these decisions, is to conduct a trial
at which both parties may adduce evidence as to the terms upon which the
Appellant was employed, evidence as to the terms upon which persons at arm's
length doing similar work were employed by the same employer, and evidence
relevant to the conditions of employment prevailing in the industry for the
same kind of work at the same time and place. Of course, there may also be
evidence as to the relationship between the Appellant and the employer. In the
light of all that evidence, and the judge's view of the credibility of the
witnesses, this Court must then assess whether the Minister, if he had had the
benefit of all that evidence, could reasonably have failed to conclude that the
employer and a person acting at arm's length would have entered into a
substantially similar contract of employment. That, as I understand it, is the
degree of judicial deference that Parliament's use of the expression "...
if the Minister of National Revenue is satisfied ..." in paragraph 5(3)(b)
accords to the Minister's opinion.
Analysis
[16]
There was no dispute that the Payer and the
Appellant were not dealing with each other at arm’s length. They are related to
each other because they are spouses of each other.
[17]
The question is whether, having regard to all
the circumstances of the employment, they would have entered into a
substantially similar contract of employment if they were not related to each
other. It is my opinion that the answer to this question is no. My opinion is
based on the following.
[18]
Prior to the period in question, the Appellant
worked for the Payer for at least three months without being paid. She said
that she performed the same duties in May to July 2014 as she performed from
August 2014 to April 2015. She again worked for the Payer from May 2015 to
April 2016 without receiving any pay.
[19]
The Payer employed two construction workers who
were paid for all the hours they worked. Their pay was deposited directly into
each of their accounts.
[20]
The Appellant had her own personal bank account
but her pay was not deposited into her account. It was included with the
Payer’s earnings and deposited into the Payer’s bank account. The Appellant
stated that this procedure was followed for convenience as all family bills
were paid from the Payer’s bank account. However, there was no evidence
concerning the amount of the Payer’s earnings or the amount deposited into his
account every two weeks and I am left to wonder whether the Appellant was
actually paid.
[21]
The Appellant was paid for working for the Payer
for 600 hours. This is the exact number of hours she required to qualify for
employment insurance benefits.
[22]
The Payer did not take steps to hire another
bookkeeper to perform the Appellant’s duties after she went on maternity leave.
[23]
When I consider the facts presented at the
hearing, the testimony and the exhibit presented at the hearing with respect to
the remuneration paid, the terms and conditions, the duration and the nature of
the work performed, I conclude that the Minister’s decision was reasonable. The
appeal is dismissed.
Signed at Ottawa, Canada, this 6th day of June 2016.
“V.A. Miller”
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