Date: 19971222
Docket: 96-2240-UI
BETWEEN:
VITO GUARAGNA,
Appellant,
and
THE MINISTER OF NATIONAL REVENUE,
Respondent.
Reasons for Judgment[1]
Rip, J.T.C.C.
[1] Vito Guaragna appeals from a determination of the Minister of National Revenue (“Respondent”), dated September 24, 1996, that he was engaged in excepted employment by virtue of paragraph 3(2)(c) of the Unemployment Insurance Act (“Act”) by Santo Guaragna, operating under the name Chaussures Santo Enr. during the periods December 21, 1992 to December 18, 1993 and November 7, 1994 to October 14, 1995. In the Minister’s view “there existed a non arm’s length relationship between Santo Guaragna and the appellant”; Santo Guaragna is the father of the appellant, Vito Guaragna.
[2] The Minister based his decision on the following facts:[2]
a) the payor, Santo Guaragna, carries on a business under the name “Chassures Santo Enr.”;
b) the payor, Santo Guaragna, is the sole proprietor of the business;
c) the payor carries on the business of a shoe store;
d) the appellant is the son of the payor;
e) the store is situated at 4669, Jarry Street East, in Ville Saint Léonard;[3]
f) the appellant was the payor’s only worker during the years in issue;
g) the appellant worked primarily as a salesman;
h) the appellant and the payor worked together during the periods in issue;
i) the appellant respected the hours of work which had been determined for him and worked approximately forty (40) hours a week;
j) the appellant was paid by cheque $250.00 per week;
k) the appellant worked for the payor since 1986 because it was impossible for him to find other employment;
l) the appellant lived free of charge in a building owned by the payor during the periods in issue;
m) the layoffs of the appellant on December 18, 1993 and October 14, 1995 were not justified based on the criteria of monthly sales:
MONTH 1993 1994 1995
January 6 906 11 257 10 383
February 5 264 5 515 7 365
March 8 977 8 081 5 315
April 9 676 13 650 12 744
May 21 100 19 075 19 263
June 14 799 16 005 17 709
July 11 839 10 638 14 132
August 9 668 7 667 8 591
September 8 477 7 694 8 447
October 11 163 12 441 10 430
November 19 817 12 730 12 476
December 14 137 9 312 11 300
n) during the calendar year 1994, the payor carried on his business alone and did not replace the appellant, notwithstanding that monthly sales were comparable with those of 1993 and 1995;
o) the appellant was related to the payor;
p) it was only that relationship which could explain the appellant’s employment.
[3] At time of trial Mr. Santo Guaragna was 61 years old and had operated a shoe store since 1976, first in partnership with his brother and, since 1986, on his own. Vito Guaragna was working as a shoe salesman elsewhere when his father asked him to join him as an employee. Santo Guaragna felt he needed two people to work in the store. The store hours were Mondays, Tuesdays and Wednesdays, from 9 am to 6 pm, Thursdays and Fridays, from 9 am to 9 pm, and Saturdays, from 9 am to 5 pm. Santo Guaragna testified that he could not operate the store at that time without help.
[4] Santo Guaragna opened and closed the store and supervised the appellant’s work as a salesman. The appellant did not have a key to the store.
[5] In December 1993, Santo Guaragna said he had a “little bit” of a financial problem and had to lay off the appellant. He was being forced by competition to lower the prices, thus reducing profits. He looked to cut costs and laying off his son was the easiest cost to eliminate. In November 1994 he rehired the appellant because “it looked like business picked up a little bit”. But, he said, he experienced the same problem and had to lay off the appellant again in October 1995. However the appellant worked for his father on a part time basis on Thursdays, Fridays and Saturdays, about twelve hours a week, in December 1995.
[6] Respondent’s counsel reviewed the business’ monthly sales for 1993, 1994 and 1995. Mr. Guaragna refused to acknowledge the sales figures but I am satisfied on the evidence, including that of Madame Francine Perreault, an Appeals Officer with Revenue Canada, that the sales amounts in counsel’s possession are legitimate. Counsel queried Mr. Guaragna as to why he retained his son during the months of January, February, March and April 1993, when sales were low but laid him off in December 1993 when sales for November 1993 and December 1993 were higher. Mr. Guaragna replied that he had lots of bills to pay in December and no money to pay them with; therefore he had to let his son go. No financial statements for the business were produced to confirm the degree of expenses claimed by Mr. Guaragna. In early 1994 “things had not picked up” so he did not rehire the appellant until the following November.
[7] Santo Guaragna stated that the appellant lived in one of his buildings in 1995 and paid a monthly rent of $340.00. The appellant produced a copy of the lease for the tenancy during the period July 1, 1995 to June 30, 1996, confirming his father’s evidence in this regard. (Exhibit A-1). Before 1994, the appellant lived on his own; he did not live at his parents’ home nor in one of his father’s buildings.
[8] Vito Guaragna testified that he has worked as a shoe salesman since 1981 and confirmed that in 1986 was working for Aldo Shoes Store when his father asked him to join him. He was paid a weekly salary of $250.00 by his father and worked 40 to 45 hours per week. His work consisted of replacing stock and servicing customers. His pay at a previous employer where he sold shoes ranged from between $200.00 to $400.00 a week, but he was paid primarily on commission.
[9] The appellant was originally laid off by his father in December 1993. In November 1994 he said his father rehired him to “see how it goes”. He was paid $250.00 per week. When he was laid off in October 1995, he applied for unemployment insurance but was refused “so [I] worked part time for my father”. He worked part time in December 1995 and again, also for twelve hours per week, from March to June 1996. On June 25, 1996 he commenced working full time for a salary of $275.00 a week.
[10] While unemployed in 1995, the appellant borrowed money to live on from friends and family, including his father.
[11] Madame Perreault reviewed the Notice of Objection to the determination filed by the appellant. In her report on the determination she took the following factors into account in recommending that the determination be confirmed:
Rétribution versée:
Le travailleur était rémunéré à raison de 250$ par semaine pour 40h de travail, ce qui représente un taux horaire de 6.25$. Le salaire versé était raisonnable compte tenu de la nature du travail exercé par le travailleur.
Modalités d’emploi:
Le travailleur agait strictement à titre de vendeur pour le payeur. Il a un horaire fixe de travail qui concorde avec les heures d’ouverture et il est sous le contrôle direct du payeur. Il est, outre le propriétaire, le seul employé du payeur. Les parties ont dmis que le magasin pouvait être opérer par une seule personne à cause du peu d’achalandage et que le propriétaire était, saud exception, au commerce 6 jours sur 6.
Durée du travail:
Le travailleur est à l’emploi du payeur depuis l’année 1986. Pendant la période en litige, le travailleur travailait pendant environ un an et était congédié pendant un an. Riendans le chiffre d’affaires de l’entreprise ne justifie les mises à pied du travailleur.
Nature et importance du travail:
Le payeur a affirmé avoir embauché le travailleur à cause de son âge et de son besoin de se reposer alors que l’on constate que les mises-à-pied sont effectuées pendant des périodes souvent très achalandées. Le travailleur n’est jamais remplacé et le payeur réussit à opérer sans employé pendant de très longues périodes et cela même lorsque les activités sont à leur plus haut niveau. L’emploi du travailleur au service du payeur n’était pas justifié et s’il l’était les mises-à-pied ne le sont pas.
Conséquemment, nous croyons que le payeur et le travailleur n’aurait pas conclu entre eux un tel contrat de travail s’ils n’avaient pas eu un lien de dépendance. L’emploi est donc exclu des emplois assurables en vertu de l’alinéa 3(2)(c)(i) de la Loi.
[12] In my view the appellant’s appeal ought to be allowed. It appears from the evidence and the pleadings that in making his determination, the Minister held account of factors which were not relevant or were not in fact true. These include: it was impossible for the appellant to find employment elsewhere since 1986 and that he lived free of charge in a building owned by his father. There is absolutely no evidence that the appellant who was employed by another shoe store in 1986 could not have found work elsewhere during the periods under review. There is also evidence that he did not live free of charge in any building owned by his father. There is no suggestion that he was getting wages in excess of the $250.00 per week.
[13] Further, the respondent did not take into account all the pertinent circumstances. The appellant’s salary working for his father was similar to that he was paid working for an employer engaged in the same business. His hours of work were reasonable for the salary he was paid. There is no evidence that the wages he was paid by his father were different from what he would have been paid for similar work by an employer with whom he did not deal at arm’s length. At trial, I expressed my dissatisfaction with certain of the testimony of Mr. Santo Guaragna, however, on the balance of probabilities, there were bona fide reasons for the layoffs of the appellant. It may well be that sales figures were high at the time the appellant was laid off but on an annual basis sales did drop from $142,000.00 in 1993 to $133,000.00 in 1994 although it did increase to $138,000.00 in 1995. I think I can take judicial notice that these years were rough economic times for many retailers and the Minister erred in not taking that into account. The Minister’s determination appears to have been strongly influenced by the relationship between the payor and the appellant and he did not consider facts favourable to the appellant; the Minister did not exercise his discretion properly and, on the evidence, the appellant ought to be deemed to deal with the payor at arm’s length.
[14] The appeal is therefore allowed and the determination of the question by the Minister is reversed.
Signed at Ottawa, Canada, this 22nd day of December 1997.
"Gerald J. Rip"
J.T.C.C.