REASONS
FOR JUDGMENT
Hogan J.
[1]
An investigation was conducted by Service Canada
regarding the eligibility of Najat Aboulmaid (the “Worker”) to claim employment
insurance benefits following her loss of employment with 6338372 Canada Inc.
(the “Appellant”). In the course of the investigation, Service Canada requested
a ruling to determine the insurability of the Worker’s employment with the
Appellant during the period from February 24, 2013 to February 21, 2014 (the
“Relevant Period”).
[2]
The Canada Pension Plan and Employment Insurance
Rulings Division determined that the Worker’s employment with the Appellant was
not insurable. The Ruling’s Officer concluded that the Worker and the Appellant
were not dealing at arm’s length and the terms and conditions of the Worker’s
employment with the Appellant was not substantially similar to the terms and
conditions of employment that would have been agreed to had the parties been
dealing at arm’s length with one another.
[3]
The Appellant disagreed with that determination
and filed an appeal to the Minister.
[4]
In confirming the initial ruling, the Minister
relied, inter alia, on the following assumptions of facts:
(a) the Appellant operated as a retailer of women’s fashion;
(b) all of the issued and outstanding shares of the Appellant belonged
to the Worker’s husband, at all material times;
(c) the Appellant hired the Worker as a sales manager;
(d) the position was not advertised. The Worker was hired because she
was the wife of the Appellant’s sole shareholder;
(e) at all material times, the Worker was paid the Ontario minimum wage;
(f) the Worker’s duties included customer sales, merchandising, pricing
and supervision of sales staff;
(g) the wage earned by the Worker was substantially below the median
wage of $28.57 paid to retail and wholesale sales managers. According to the
Minister, the lowest wage paid to an employee occupying that position was $14
per hour;
(h) the Worker often delayed depositing the wage checks that she
received from the Appellant until she was informed by her husband that the
Appellant had sufficient funds on hand to honor the check; and
(i) the Worker continued to provide services to the Appellant for free
while she was receiving employment insurance benefits.
I. Analysis
[5]
It is undisputed between the parties that they
were not dealing at arm’s length.
[6]
The relevant legislative provisions are
reproduced below:
5. (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)
(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 concluded 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 question is whether it was reasonable for the
Minister to conclude that the Worker and the Appellant would not have entered
into a substantially similar contract of employment had they been dealing at
arm’s length.
[8]
Based on the evidence at hearing, I conclude
that the Minister’s decision was reasonable.
[9]
In my view, the evidence shows that the Worker
was underpaid for the services that she provided to the Appellant. As noted
earlier, she received minimum wage for her services while the median wage in
Ontario for employees providing similar services is much higher. The evidence
also shows that she was paid the same wage as other sales personnel, while she
performed more tasks and assumed greater responsibility in her employment with
the Appellant.
[10]
Mr. Taki Hasson, the sole shareholder of the
Appellant and husband of the Worker testified on behalf of the Appellant. He
claimed that his wife was not the most senior employee of the company.
According to the witness, Ms. Anne Abdul-Rahman was hired by the Appellant
before the Worker and performed similar duties to that of the Worker. She was
also paid the minimum wage for her services.
[11]
Mr. Hasson’s evidence was contradicted in part
by his wife who also testified on behalf of the Appellant. She admitted that
she has worked for the Appellant for a longer period of time than Ms.
Abdul-Rahman.
[12]
The Respondent produced exhibit R-5 which is a
printout summary of T-4s employment information returns filed by the Appellant
with the Canada Revenue Agency (the “CRA”) for the 2005, 2013 and 2014 taxation
years. The printout shows that the Appellant did not file a T-4 information
slip for Ms. Abdul-Rahman for those taxation years.
[13]
In light of the above, I conclude that Mr.
Hasson’s evidence regarding the similarity of the Worker’s and Ms.
Abdul-Rahman’s employment with the Appellant is not reliable.
[14]
The Appellant could have called Ms. Abdul-Rahman
as a witness to corroborate Mr. Hasson’s evidence on this matter. I draw a
negative inference from the Appellant’s decision not to call Ms. Abdul-Rahman
as a witness to corroborate Mr. Hasson’s testimony.
[15]
The Respondent produced accounting information showing
the wages paid to the Worker over a 53 week period and bank records of the
Worker that shows when she deposited her pay in her bank account. These records
show that the Worker often delayed cashing her pay checks. In some instances,
she waited more than three months before depositing a pay check. This evidence
corroborates the ruling officer’s finding that Mr. Hasson often asked his wife
not to cash her pay checks when the Appellant had insufficient funds to meet
its payroll obligations. I agree with the Respondent’s observation that an
unrelated employee would have not agreed to delay depositing a pay check in
similar circumstances.
[16]
Finally, based on the evidence, I conclude that
the Worker did provide some services to the Appellant for free. This is not
typical of an arm’s length relationship.
[17]
It is well established that I cannot substitute
my decision for the Minister’s decision, when the facts relied on by the
Minister are not shown to be incorrect and there are no new facts that could
have influenced the Minister’s determination that the Worker’s employment with
the Appellant was not based on arm’s length terms and conditions of employment.
[18]
For all of these reasons, the appeal is
dismissed.
Signed at Ottawa, Canada, this 11th
day of January, 2018.
“Robert J. Hogan”
Email this Content