Le D'Orsay Restaurant Pub Inc. c. M.R.N.

Le D'Orsay Restaurant Pub Inc. c. M.R.N. Court (s) Database Tax Court of Canada Judgments Date 2004-09-13 Neutral citation 2004 TCC 609 File numbers 2004-1839(EI) Judges and Taxing Officers Alain Tardif Subjects Employment Insurance Act Decision Content [OFFICIAL ENGLISH TRANSLATION] Docket: 2004-1839(EI) BETWEEN: LE D'ORSAY RESTAURANT PUB INC., Appellant, And THE MINISTER OF NATIONAL REVENUE, Respondent, And MARIE-FRANCE LEGAULT, Intervener. ____________________________________________________________________ Appeal heard on August 27, 2004, at Québec, Quebec Before: The Honourable Judge Alain Tardif Appearances: Agent for the Appellant: Alain Savoie Counsel for the Respondent: Emmanuelle Faulkner For the Intervener: The Intervener herself ____________________________________________________________________ JUDGMENT The appeal under subsection 103(1) of the Employment Insurance Act is allowed on the ground that the work performed by the Intervener during the period in issue is excluded from insurable employment in accordance with the attached Reasons for Judgment. Signed at Ottawa, Canada, this 13th day of September 2004. "Alain Tardif" Tardif J. Certified true translation Colette Dupuis-Beaulne [OFFICIAL ENGLISH TRANSLATION] Citation: 2004TCC609 Date: 20040913 Docket: 2004-1839(EI) BETWEEN: LE D'ORSAY RESTAURANT PUB INC., Appellant, And THE MINISTER OF NATIONAL REVENUE, Respondent, And MARIE-FRANCE LEGAULT, Intervener. REASONS FOR JUDGMENT Tardif J. [1] This is an appeal from a determination by the Respondent that the work performed by Marie-France Legault for the Appellant from January 1, 2002, to May 16, 2003, met the requirements of a contract of service, despite the fact that the parties were not dealing with each other at arm's length. [2] To justify and explain his determination, the Respondent relied on the following assumptions of fact: [TRANSLATION] 5.(a) the Appellant was incorporated on July 31, 1979; (b) the Appellant operated a restaurant and bar; (c) the Appellant's business was operated every day from 11:00 a.m. to 3:00 a.m.; (d) the Appellant had 40 employees during the winter and 100 in summer; (e) in 2002, the Appellant had turnover of $2,285,921; (f) the Worker was hired as an administrative assistant; (g) the Worker's duties were to do the Appellant's accounting, that is, the bookkeeping, pay, bank deposits and financial statements, and to manage the computer equipment and handle human resources, that is, staff recruitment and training; (h) the Worker had a flexible work schedule; (i) the Worker was entered on the Appellant's payroll at 80 hours every two weeks; (j) the Worker mostly worked on the Appellant's premises and sometimes at her residence for the accounting; (k) the computer at her residence was supplied by the Appellant; (l) the Worker followed Marcel Veuilleux's instructions in performing her duties; (m) the Appellant had the power to control the Worker's work; (n) the Worker was paid $1,000 a week; (o) the Worker was paid by direct deposit every two weeks; (p) all the materials and equipment that the Worker used belonged to the Appellant; (q) the Worker had no personal financial interest in the business and bore no financial risk; (r) the Worker had to bear no financial risk in performing her duties; (s) the Worker's duties were integrated into the Appellant's operations; 6. The Worker and the Appellant are related persons within the meaning of the Income Tax Act because: (a) the sole shareholder of the Appellant was Marcel Veuilleux; (b) the Worker is Marcel Veuilleux's spouse; (c) the Worker is related to Marcel Veuilleux, who controls the Appellant. 7. The Minister also determined that the Worker and the Appellant were deemed to be dealing with each other at arm's length in the context of this employment because he was satisfied that it was reasonable to conclude that the Appellant and the Worker would have entered into a substantially similar contract of employment if they had been dealing with each other at arm's length, having regard to the following circumstances: (a) the Worker was always paid; (b) the remuneration paid to the Worker was reasonable in view of the duties performed and her level of responsibility in the business; (c) the Worker's hours of work were regular and not excessive; (d) the terms and conditions of the Worker's employment were reasonable; (e) the Worker worked for the Appellant without any work stoppage; (f) the Worker's work coincided with the Appellant's needs; (g) the duration of the Worker's employment was reasonable; (h) the Worker's work was essential to the proper operation of the Appellant's business; (i) the work performed by the Worker was important to the Appellant's business; (j) the nature and importance of the Worker's work were reasonable. [3] All the facts were admitted, with the exception of subparagraphs 5(j) and (l), 7(c), (d), (e), (f) and (j), which were denied; the Appellant knew nothing of the assumed facts stated in subparagraph 7(g). [4] The Respondent stated a number of facts, many of which were couched in standard boilerplate. The evidence brought by the Appellant and the Intervener, however, focused on the aspects that were genuinely important and relevant in determining whether their non-arm's length dealing influenced the contract of employment in issue. [5] The Intervener and her spouse testified. The Respondent did not call any witnesses. The evidence showed that, during the period in issue, the Intervener enjoyed most of the rights and privileges normally reserved for the owner of the business. [6] Whereas the other employees of the business received the paid vacation leave provided for by the Act or the usual vacation, that is, the equivalent of four percent minimum up to six percent of wages based on seniority, the Appellant received paid leave equal to eight weeks of vacation a year, approximately 16 percent of her salary. [7] She was responsible for hiring, training and dismissing most of the employees of the business. [8] She could be absent at any time and plan her work around her family and personal concerns, as she wished and at her own convenience, without having to ask anyone's permission. [9] Whereas all employees' absences due to illness had to be justified by a medical certificate, the Intervener did not have to explain or give reasons for her absences due to medical or any other reasons. [10] When absent, employees saw their wages cut by an amount consistent with the duration of the absence. The Intervener stated that she had received the same salary regardless of her hours of work or the duration of her absence. [11] At one point, the Intervener received a $17,000 pay increase justified on the grounds of an improved standard of living in view of the fact that business was good. The wages of the other employees were based on their experience and ability, not at all on the prosperity or profits of the business. [12] Having the complete confidence of her spouse, the owner of the business, the Intervener enjoyed status comparable to what she would have had if she had been a co-owner. [13] To conclude, as the Respondent did, that the work performed by the Intervener was comparable to the work that a person dealing at arm's length could and should have done is simply unreasonable and utterly unjustified. [14] This is a case in which the analysis was likely shaped by a concern that had absolutely nothing to do with the facts, the sole purpose being to make a finding that would enable him to collect employment insurance premiums. [15] It is surprising to see in some cases, including this one, how certain analysts can reach utterly contradictory conclusions based on appreciably the same facts. [16] In the instant case, if the Appellant had claimed employment insurance benefits, I am convinced that the determination would have been that the employment had to be excluded on the grounds of non-arm's length dealing. Such a finding moreover would have been appropriate. [17] The determination of the nature of a contract of employment has absolutely nothing to do with premiums or benefit entitlement. [18] The obligation to pay premiums and the right to receive benefits arise from the nature of a contract of employment; they must never be a factor in defining the nature of the legal relationship. Some analysts seem deeply influenced by these rights or duties in analyzing the facts of such a case. [19] In the case at bar, the available and relevant facts do not in any way justify the determination that a third party would have enjoyed a substantially similar contract of employment to that of the Intervener. [20] The weight of the evidence is that the work performed by the Intervener for the Appellant was in no way similar or comparable to that which the other employees performed or which a person responsible for the same administrative work should or could have performed. The Intervener's conditions of employment were much more comparable to those of an owner or co-owner of a business than those of an employee. [21] As the Intervener's work was subject to paragraph 5(2)(i) of the Employment Insurance Act, it must therefore be excluded from insurable employment. The appeal is therefore allowed. Signed at Ottawa, Canada, this 13th day of September 2004. "Alain Tardif" Tardif J. Certified true translation Colette Dupuis-Beaulne CITATION: 2004TCC609 COURT FILE NUMBER: 2004-1839(EI) STYLE OF CAUSE: Le D'Orsay Restaurant Pub Inc. v. The Minister of National Revenue and Marie-France Legault PLACE OF HEARING: Québec, Quebec DATE OF HEARING: August 27, 2004 REASONS FOR JUDGMENT BY: The Honourable Judge Alain Tardif DATE OF JUDGMENT: September 13, 2004 APPEARANCES: For the Appellant: Alain Savoie For the Respondent: Emmanuelle Faulkner For the Intervener: The Intervener herself COUNSEL OF RECORD: For the Appellant: Name: Firm: For the Respondent: Morris Rosenberg Deputy Attorney General of Canada Ottawa, Canada