Connolly v. M.N.R.

Connolly v. M.N.R. Court (s) Database Tax Court of Canada Judgments Date 2005-03-15 Neutral citation 2005 TCC 194 File numbers 2004-1477(EI) Judges and Taxing Officers Eric A. Bowie Subjects Employment Insurance Act Decision Content Docket: 2004-1477(EI) BETWEEN: DORIS MARY CONNOLLY, Appellant, and THE MINISTER OF NATIONAL REVENUE, Respondent. ____________________________________________________________________ Appeal heard on common evidence with the appeal of Kevin Joseph Connolly (2004-1479(EI), on November 22, 2004, at St. John's, Newfoundland, By: The Honourable Justice E.A. Bowie Appearances: Agent for the Appellant: Ray Connolly Counsel for the Respondent: Steven Leckie ____________________________________________________________________ AMENDED JUDGMENT The appeal pursuant to subsection 103(1) of the Employment Insurance Act is allowed and the decision of the Minister of National Revenue on the appeal made to him under section 92 of that Act is varied on the basis that the Appellant was engaged in insurable employment within the meaning of paragraph 5(1)(a) of the Act for the periods February 28, 2001 to January 11, 2002 and October 21, 2002 to July 25, 2003. Signed at Ottawa, Canada, this 30th day of March, 2005. "E.A. Bowie" Bowie J. Docket: 2004-1479(EI) BETWEEN: KEVIN JOSEPH CONNOLLY, Appellant, and THE MINISTER OF NATIONAL REVENUE, Respondent. ____________________________________________________________________ Appeal heard on common evidence with the appeal of Doris Mary Connolly (2004-1477(EI), on November 22, 2004, at St. John's, Newfoundland, By: The Honourable Justice E.A. Bowie Appearances: Agent for the Appellant: Ray Connolly Counsel for the Respondent: Steven Leckie ____________________________________________________________________ AMENDED JUDGMENT The appeal pursuant to subsection 103(1) of the Employment Insurance Act is allowed and the decision of the Minister of National Revenue on the appeal made to him under section 92 of that Act is varied on the basis that the Appellant was engaged in insurable employment within the meaning of paragraph 5(1)(a) of the Act for the period January 14, 2002 to October 18, 2002. Signed at Ottawa, Canada, this 30th day of March, 2005. "E.A. Bowie" Bowie J. Citation: 2005TCC194 Date: 20050330 Docket: 2004-1477(EI) 2004-1479(EI) BETWEEN: DORIS MARY CONNOLLY AND KEVIN JOSEPH CONNOLLY, Appellants, And THE MINISTER OF NATIONAL REVENUE, Respondent. REASONS FOR JUDGMENT BowieJ. [1] Doris and Kevin Connolly are married to each other. Theresa Connolly is the sister of Doris Connolly. At all relevant times, Theresa Connolly was the person appointed by the Department of Health and Community Services of Newfoundland and Labrador (the Department) to provide alternate family care services to Ricky Chafe, a disabled individual whose family was unable to provide for his care. While Theresa Connolly fulfilled the principal role of care provider for Ricky, she was not able to do this 24 hours per day, seven days per week. She therefore enlisted the help of the Appellants to care for Ricky during certain periods each week in order to give her some respite from her duties. In the jargon of the Department, people who take on this auxiliary caregiving role are known as respite workers, and they are paid for their services by the provincial government. The issue before me in these two appeals is whether the Appellants, when carrying out the duties of respite workers, were engaged in insurable employment for purposes of the Employment Insurance Act (the Act). For the reasons that follow, I have concluded that they were. [2] The relevant provisions of the Act are paragraphs 5(1)(a) and 5(2)(i), and subsection 5(3). These read 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; 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), (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. [3] The evidence in this case was both confused and confusing. The Appellants' son acted as their agent in presenting the case, and he was intent upon showing that the officials of the Department had treated his parents badly throughout the whole period during which they provided services to Ricky. As a result, much of the evidence was not relevant to the issues before me. It appears that in addition to acting as respite workers during certain periods, the Appellants also replaced Theresa Connolly in the role of providing alternate family care for one or more periods of time. The evidence relating to these interludes is not relevant, however, as it is clear both from the original rulings under section 90 and from what was said at the hearing before me that the Appellants' claims that they were engaged in insurable employment relate only to the periods of respite work. Those periods are from February 28, 2001 to January 11, 2002 and from October 21, 2002 to July 25, 2003 in the case of Doris Connolly, and from January 14, 2002 to October 18, 2002 in the case of Kevin Connolly. [4] It appears that the Appellants applied for benefits under the Act at some time after they ceased to provide the respite services, and that Human Resources Development Canada requested rulings under section 90 in respect of each Appellant as to whether they had been engaged in insurable employment. In each case, the ruling was given by Aleesa McDonald, an officer of the Canada Customs and Revenue Agency, as it was then called. She ruled first in the case of Doris Connolly on October 31, 2003, and the operative part of her ruling is as follows: We received a request from Human Resources Development Canada for a ruling regarding the insurability of your employment with Theresa Connolly for the periods February 28, 2001 to January 11, 2002 and October 21, 2002 to July 25,2003. Your employment as an employee performing services under a contract of service with Theresa Connolly during the periods under review were not insurable because under paragraph 5(2)(i) of the Employment Insurance Act, you are considered not to have dealt with each other at arm's length. The reason we consider you not to have dealt with each other at arm's length is that you were related by blood to Theresa Connolly and when we reviewed your working relationship with her, we could not reasonably conclude that: - An unrelated worker would be employed under similar terms and conditions. - Your employer would have hired an unrelated person for similar periods of employment. On November 17, 2003, she ruled in the case of Kevin Connolly in essentially the same terms. [5] Dissatisfied with these rulings, the Appellants appealed from them to the Minister of National Revenue under section 91 of the Act. These appeals were unsuccessful, the Minister ruling that the employment was not insurable, for reasons expressed in these terms: It has been decided that this employment was not insurable employment as a contract of service was considered not to be existence [sic] in accordance with the Act. In alternative [sic], having regard to all the circumstances of the employment including the terms and conditions and the duration, the Minister has concluded that the parties would not have entered into a substantially similar contract of employment if they had been dealing with each other at arm's length. As a result the employment was considered to be excluded employment and not insurable for the purposes of the EI Act. [6] Nothing in the record that was introduced before me shows any basis for the Minister's conclusion that "... the parties would not have entered into a substantially similar contract of employment if they had been dealing with each other at arm's length". Indeed, I have some difficulty seeing how the Minister could compare the terms and conditions of the contract of service with those prevailing in the market at that time and place when he had previously found that there was no contract of service at all. I note, too, that the Replies to the Notices of Appeal filed by the Deputy Attorney General of Canada on behalf of the Respondent do not allege that the Minister had assumed as a fact that the terms of the contract of service between the Appellant in each case and the payor, who is Mrs. Connolly's sister, are not terms that people acting at arm's length would have arrived at. Indeed, no such allegation of fact is made in the pleading at all. The closest that these pleadings come to alleging that is in paragraph 16, under the heading b. statutory provisions, grounds relied on and relief sought: 16. He further submits that, considering all the facts pursuant to paragraph 5(3)(b) of the Act, it was reasonable for the Respondent to conclude that the Appellant and the Payor would not have entered into a substantially similar contract of employment if they had been dealing with each other at arm's length. Significantly, even this paragraph falls short of alleging as a fact that the Minister did form the opinion contemplated by paragraph 5(3)(b) of the Act. [7] In my view the evidence, confused though it was, does establish that when the Appellants acted as respite workers to relieve Theresa Connolly, they did so as employees. The nature of the work involved in this case does not fit easily into a Wiebe Door[1] analysis. Considering first the question of control, I conclude that the Appellants were ultimately subject to the control of the Department as to the manner in which they carried out the work, as indeed was Theresa Connolly herself. The work can best be described as caring for the physical needs of Mr. Chafe, whose disability was such that he required both supervision and physical assistance in virtually every aspect of daily life. This was provided at the expense of, and under the legislated mandate of, the Department, which had the authority to dictate the parameters for delivery of the service. As a practical matter there was, of course, little opportunity for day-to-day supervision, but there is no doubt that Theresa Connolly and the Appellants were all required to perform the services within a framework established by the Department. [8] Counsel for the Respondent argued that the facet of the test that looks to the ownership of tools militates in favour of finding the Appellants to be independent contractors. This submission is based upon the evidence that the Appellants had to make certain modifications to their residence in order to satisfy the requirement of the Department that it meet certain standards as to smoke and carbon monoxide detectors and fire extinguishers in order to be approved as suitable by the Department, as Mr. Chafe would stay overnight in the Appellants' house on certain occasions. I do not consider this to be an aspect of the Wiebe Door test that should be given much weight. The Appellants were not required to spend a very large amount on these items, and I am satisfied that the expenditures, from their perspective, were not in the nature of investment in a business. They were simply doing what the Department required of them in order to be able to do the work. This aspect must be considered in light of the fact that the Appellants did not take on the care of Mr. Chafe as respite workers so much for the money they were paid as to assist Theresa Connolly, who was finding that the care of Mr. Chafe was a greater burden than she could easily bear. The assumption of this responsibility by the Appellants was not an act of entrepreneurship so much as an act of compassion on their part. [9] There was certainly no opportunity for the Appellants in this case to make profits or to sustain losses. They were paid an hourly wage for the time that they spent as respite workers, and the rate was fixed by the Department, which was responsible for paying it. The evidence was that they submitted an account of their hours to the government's administrative branch, which paid them at the stipulated hourly rate. [10] Once the evidence has been considered in the light of the Wiebe Door factors, the question that must be answered is whether a person informed about the facts would consider that the worker is in business on his own account.[2] Having regard to all the evidence, I do not see how anyone could reasonably conclude that these two Appellants were conducting a business when they looked after Mr. Chafe. Clearly they were wage-earners. This result is dictated by the decision of the Federal Court of Appeal in Wiebe Door as it applies to the facts of this case, and by common sense. I have not overlooked the judgment of the Federal Court of Appeal in Poulin v. M.N.R.,[3] but the facts of that case are very different from the case before me. It dealt with medical services provided on an ongoing basis. The Appellants in this case are essentially providing unskilled labour on a short-term basis. [11] At the hearing before me, the Appellants took the position that they were not employed by Theresa Connolly, but by the province of Newfoundland and Labrador. There is a good deal of common sense behind that submission. It is the provincial Department that has the responsibility to provide for the care of those who cannot care for themselves and whose families cannot care for them. It is the Department that fixes the parameters of the care that is to be provided, that approves the people who provide alternate care and the premises in which they provide it. It pays the allowances to alternate families and the wages of respite workers such as the Appellants. The original rulings and the decisions on appeal to the Minister both proceeded on the basis that the employer of the Appellants in their capacity as respite workers was Theresa Connolly. Neither party suggested that Mr. Chafe was the employer, and although there was little evidence directly on the point, what evidence there was establishes to my satisfaction that Mr. Chafe did not have the capacity to enter into a contract of employment. [12] I was referred by counsel for the Respondent to the provisions of sections 2 and 3 of the Self-managed Home Support Services Act[4] of Newfoundland and Labrador. They read as follows: 2. In this Act "home support services" means services which the person receiving them assumes responsibility for managing or which another person or group of persons assumes responsibility for managing on behalf of the person receiving them and includes personal care, household management, behavioral aide services and respite services paid for in whole or in part from public money and provided to individuals and families to assist with activities of daily living in their own homes but does not include services provided by a person whose business or a part of whose business it is to provide those services using persons in its employ to do so. 3(1) A person to whom home support services are being provided is considered to be the employer of the person who provides the home support services. (2) Notwithstanding subsection (1), where a person to whom home support services are provided (a) is not competent to make decisions and carry out tasks ordinarily associated with being an employer and another person or a group of persons undertakes to do so on his or her behalf; or (b) agrees with another person or a group of persons that that person or group shall make decisions and carry out tasks ordinarily associated with being an employer and that person or group enters into a contract with the minister to act as the employer, that person or group is considered to be the employer of the person who provides the home support services. This statute appears to me to be intended only to apply to services provided to an individual in his or her own home, and so has no application to this case. The services provided to Mr. Chafe by Theresa Connolly and by the Appellants were not provided in Mr. Chafe's home but in the home of Theresa Connolly, and in the home of the Appellants. Nor is there any evidence from which I could properly determine that there is a contract of the kind that section 3 of that Act contemplates. All of that leads me to believe that the Appellants' employment was not "with Theresa Connolly" as the original ruling put it, but that the employer was the province of Newfoundland and Labrador. It follows that the employment was insurable, and no question arises under subsections 5(2) and (3) of the Act as the Appellants and the province were dealing with each other at arm's length. [13] Even if I had reached the conclusion that Theresa Connolly was the one who employed the Appellants, I would nevertheless have concluded that the employment was insurable. It is well-settled that the Minister is entitled to form his own opinion whether the terms of employment entered into between persons not acting at arm's length are those that would have been arrived at between strangers, and that the opinion is to be treated with great deference by this Court upon an appeal. It will only be interfered with if, following the hearing, it has been shown that the Minister's opinion could not reasonably have been arrived at if he had had before him all the facts established before the Court. Nevertheless, the opinion cannot stand in this case. As I have already said, there was no evidence at all, nor even an assumption of fact, to support the Minister's opinion. Such evidence as there was before me on the issue points to the conclusion that not only the rate of pay but also the duties and other parameters of the employment were established unilaterally by the Department. It follows that the Appellants, whether working for the provincial government or for Theresa Connolly, worked on exactly the terms and conditions that would have applied to anyone else doing the same work. [14] The employment was insurable employment, and so the appeals will be allowed and the determinations will be varied to provide that the Appellants were at all material times engaged in insurable employment. Signed at Ottawa, Canada, this 30th day of March, 2005. "E.A. Bowie" Bowie J. CITATION: 2005TCC194 COURT FILE NOS: 2004-1477(EI) and 2004-1479(EI) STYLE OF CAUSE: Doris Mary Connolly and Kevin Joseph Connolly and The Minister of National Revenue PLACE OF HEARING: St. John's, Newfoundland DATE OF HEARING: November 22, 2004 REASONS FOR JUDGMENT BY: The Honourable Justice E.A. Bowie DATE OF AMENDED JUDGMENT: March 30, 2005 APPEARANCES: Agent for the Appellants: Ray Connolly Counsel for the Respondent: Steven Leckie COUNSEL OF RECORD: For the Appellant, Crystal Beach Optical Inc. Name: N/A Firm: N/A For the Respondent: John H. Sims, Q.C. Deputy Attorney General of Canada Ottawa, Canada [1] Wiebe Door Services Ltd. v. M.N.R., 87 DTC 5025. [2] See Market Investigations Ltd. v. Minister of Social Security, [1968] 3 All E.R. 732 (Q.B.D.); 671122 Ontario Ltd. v. Sagaz Industries Canada Inc., [2001] 2 S.C.R. 983. [3] 2003FCA50. [4] S.N.L. 1998 c. S-13.1.