Truscelo Messina c. M.R.N.

Truscelo Messina c. M.R.N. Court (s) Database Tax Court of Canada Judgments Date 2004-03-05 Neutral citation 2004 TCC 63 File numbers 2003-1788(EI) Judges and Taxing Officers Alain Tardif Subjects Employment Insurance Act Decision Content [OFFICIAL ENGLISH TRANSLATION] Docket: 2003-1788(EI) BETWEEN: SYLVANA TRUSCELO MESSINA, Appellant, and THE MINISTER OF NATIONAL REVENUE, Respondent. _______________________________________________________________ Appeal heard on January 14, 2004, at Montréal, Quebec Before: The Honourable Judge Alain Tardif Appearances: Counsel for the Appellant: Carmine Mercadante Counsel for the Respondent: Antonia Paraherakis _______________________________________________________________ JUDGMENT The appeal under subsection 103(1) of the Employment Insurance Act is allowed and the decision rendered by the Minister of National Revenue is amended because the work that the appellant performed during the period from January 3, 1995, to July 5, 2002, for Café Sorrento Inc. constituted insurable employment, according to the attached Reasons for Judgment. Signed at Ottawa, Canada, this 5th day of March 2004. "Alain Tardif " Tardif J. Certified true translation Manon Boucher [OFFICIAL ENGLISH TRANSLATION] Reference: 2004TCC63 Date: 20040305 Docket: 2003-1788(EI) BETWEEN: SYLVANA TRUSCELLO MESSINA, Appellant, and THE MINISTER OF NATIONAL REVENUE, Respondent. REASONS FOR JUDGMENT Tardif J. T.C.C. [1] This is the appeal from a decision of May 2, 2003. The decision is that the work that the appellant performed during the period from January 3, 1995, to July 5, 2002, for Bar Café Sorrento Inc. must be excluded from insurable employment, following the exercise of the discretion required by the non-arm's length relationship between the Appellant and the officers of the company paying the earnings. The Appellant's sons had effective control of the company that employed her. [2] The presumptions of fact used to justify the decision were the following: (a) Since 1990, the Payor has been operating a coffee bar that sells coffee and alcoholic beverages. (b) The Appellant's sons, Antonio Messina Jr. and Calogero Messina, were equal partners in the Payor. (c) The Payor's business was operated year-round, from Monday to Sunday, between the hours of 7:00 a.m. and 3:00 a.m. (d) The Appellant was employed by the Payor as a server in the bar; she also cleaned the establishment. (e) The Appellant generally worked from Monday to Friday, from 8:00 a.m. until 4:30 p.m./5:00 p.m., i.e., a 40-hour work. (f) The Appellant's work was supervised by one of the shareholders, who was always on duty. (g) The Appellant's employment with the Payor did not entail any expenses for her. (h) The Appellant was entitled to two weeks' paid vacation annually. (i) During the period in question, the Appellant received fixed earnings of $800 a week. (j) In addition to her earnings, the Appellant received a bonus of $10,000 in February 2001 (and a second in February 2002) with no increase in her duties. (k) The Payor laid the Appellant off on July 5, 2002, claiming that sales had decreased, when in fact the business's growth curve did not justify this decision. (l) The Payor's sales increased from $643,000 in 1997 to $1,055,980 in 2001. (m) Moreover, the Payor gave decreased sales as the reason for terminating the Appellant's employment, whereas in February 2001 and February 2002, it paid the Appellant and Antonio Messina, the Appellant's husband, $10,000 in bonuses. [3] The Appellant admitted paragraphs (a), (b), (c), (f), (g) and (h) quoted above, which were taken from paragraph 5 of the Reply to the Notice of Appeal. She also admitted paragraphs (d), (e), (i) and (k), but reserved the right to present additional evidence concerning them. Finally, she denied paragraphs (j), (l) and (m). [4] The relevant facts are not contested. Moreover, the hearing dealt primarily with the question of two bonuses of $10,000 each that the Appellant was paid in February 2001 and February 2002. [5] Counsel for the employer explained that the company had paid these bonuses in recognition of the Appellant's exceptional cooperation in operating the business. Counsel also stated that, over the years, the Appellant had always made herself available to work several hundred hours of overtime. [6] Counsel also stated that she was paid the bonuses in recognition of services rendered during all the years preceding the fiscal year in which payment was made. Apart from one fiscal year in which one of the bonuses was paid, the company had the financial capacity to pay these bonuses. Moreover, the documentary evidence revealed that the company had grown and been profitable for most of the period in question. [7] The Respondent attached considerable and decisive importance to this question of bonuses. The official in charge of the file admitted that the appellant had in fact performed the work over the years, even adding that this work met all the requirements and conditions to be considered insurable. [8] He also stated that the question of bonuses had been the deciding factor in his recommendation to exclude the appellant's work from insurable employment. [9] After stating that this was the only consideration, he qualified his assessment somewhat by estimating at 90 per cent the importance of this factor in making the decision. He claimed that the Appellant's salary was somewhat high, given that she worked days and not evenings when the pay was generally higher in this field of economic activity. [10] He stressed that the two bonuses constituted very substantial pay increases for the two years when they were paid. He did not assess the impact of amortizing the bonuses over the full length of the period in question. [11] Alain Lacoste acknowledged that the work performed by the Appellant, from January 3, 1995, until July 5, 2002, had been performed continuously, without interruption. According to him, the work met all the requirements to be considered insurable. He admitted that, were it not for the two bonuses, he would have recommended that the work be considered insurable. [12] Does giving so much importance to - indeed basing the determination primarily on - this one factor constitute a significant error and a serious failing that could invalidate the findings made? [13] My answer is yes. It was established that the Appellant's involvement in the business justified the payment of these bonuses. It was also established that decision to pay the bonuses was based on the company's performance when it was prosperous and profitable. The fact that payment was made during a difficult financial year may be a troubling aspect, but it is certainly not the deciding factor. [14] The Appellant had been working for the company for a number of years. The bonuses were special recognition of and appreciation for the quality of the work that the Appellant had performed for more than seven years. [15] Over the years, the Appellant had worked hundreds of hours of unpaid overtime because she was paid a fixed weekly salary. The representative of the company, her son, explained that the bonuses were, so to speak, a form of compensation amply justified by the quantity and quality of the work performed. [16] The company continuously employed the Appellant without interruption during the period in question. The work she did was important and necessary for the operation of the company. [17] This is not a case where the parties were indulgent and accommodating in order to obtain employment insurance benefits. The Respondent admitted that the work performed during the period in question, i.e., for nearly eight years, would have been insurable had it not been for the bonuses. [18] I do not believe that payment of two bonuses during nearly eight years of work can constitute a deciding factor that taints the quality of an employment relationship. The two bonuses, totalling $20,000, average out at approximately $2,500 a year, or some $50 a week. [19] During the very long period of employment, the Appellant was a model, available, reliable and responsible employee. The fact that her sons recognized her contribution and that the company they headed rewarded her does not, in my opinion, have any bearing on the quality of her daily and weekly work. [20] Moreover, to accept the Respondent's analysis would disqualify retroactively employment that, until the decision was made to pay a bonus, was insurable. Consequently, given the facts and circumstances and the particular context, the question of bonuses should be excluded from the facts that are relevant in determining the insurability of the work performed. [21] The question of bonuses was the deciding factor during the analysis of the case. The undue importance given to this factor led the Respondent to reach a completely unreasonable conclusion, having regard to all the genuinely relevant facts. [22] Assuming that the question of the bonuses should not have been the deciding factor in the analysis, I conclude that the work performed by the Appellant should have been considered insurable. [23] Moreover, the investigator and analyst in the file clearly admitted that, had it not been for the bonuses, he would have recommended that the work performed by the Appellant, during the long period in question, be considered insurable employment since all the conditions and criteria had been met. [24] I therefore allow the appeal and decide that the work that the appellant performed for Bar Café Sorrento Inc., from January 3, 1995, to July 5, 2002, was insurable employment. Signed at Ottawa, Canada, this 5th day of March 2004. "Alain Tardif" Tardif J. Certified true translation Manon Boucher