Date: 19980619
Docket: 97-622-UI
BETWEEN:
SÉBASTIEN BOUCHARD,
Appellant,
and
THE MINISTER OF NATIONAL REVENUE,
Respondent.
Reasons for Judgment
PRÉVOST, D.J.T.C.C.
[1] This appeal was heard at Québec, Quebec on June 2, 1998.
[2] It is from a decision by the Minister of National Revenue ("the Minister") dated March 19, 1997 that the appellant's employment with Jean-Roland Bouchard, operating "Jean R. Bouchard", the payer, from November 26, 1995 to July 13, 1996 was not insurable because it was employment in which the employee and employer were not dealing with each other at arm's length.
[3] The Notice of Appeal reads as follows:
[TRANSLATION]
1. The appellant held employment as an apprentice electrician with [TRANSLATION] "Jean-Roland Bouchard, electrical contractor";
2. the appellant's employment was held pursuant to a contract of service;
3. the contract of service under which the appellant held his employment met the tests for insurability;
4. the appellant further submits that the respondent exercised his discretionary authority arbitrarily in deciding that this was not insurable employment because the employee and the employer were not dealing with each other at arm's length . . . .
[4] In his Reply to the Notice of Appeal the respondent admitted the facts alleged in paragraph 1 of the Notice of Appeal but denied those alleged in paragraphs 2, 3 and 4. In paragraph 7 of the Reply, he wrote the following:
[TRANSLATION]
7. In arriving at his decision the respondent Minister of National Revenue relied inter alia on the following facts:
(a) the payer had been a self-employed electrical contractor since 1976; (A)
(b) the payer had no registered trade name; (NK)
(c) the payer was the sole owner of the business; (NK)
(d) the appellant is the payer's son; (A)
(e) the appellant was in his second year as an apprentice electrician; (A)
(f) the appellant alleges that he worked for 18 weeks during the period at issue; (A)
(g) the appellant installed electrical outlets and wires for the payer; (ASA)
(h) the appellant did not have an electrician's licence: it was the payer who had one; (ASA)
(i) the payer also operated a business selling products for making homemade beer and wine under the trade name "Le Coin du Brasseur Enr."; (NK)
(j) the appellant was the payer's only employee in the electrical business; (A)
(k) the appellant worked alone and was not supervised by the payer; (D)
(l) the payer did not check the appellant's working hours; (D)
(m) the appellant was always paid for 32-hour work weeks with a fixed salary of $506.87; (A)
(n) the appellant carried his working hours over from week to week so as to have only 32-hour weeks in the payroll; (D)
(o) the appellant worked some weeks for the payer without pay; (D)
(p) the weeks allegedly worked by the appellant do not correspond to the weeks actually worked; (D)
(q) the appellant had the payer's truck at his disposal and used it for work-related and personal purposes; (A)
(r) during the period at issue the appellant did electrician's work on his own account and did not turn the money over to the payer; (D)
(s) the appellant and the payer were not dealing with each other at arm's length within the meaning of the Income Tax Act; (A)
(t) were it not for the fact that the appellant and the payer were not dealing with each other at arm's length, the appellant would not have been hired to do work such as this; (D)
(u) further, the payer would never have hired a person with whom he was dealing at arm's length on the same terms as those offered to the appellant, still less for a period such as this; (D) and
(v) there was no contract of service between the appellant and the payer during the period at issue. (D)
[5] In the foregoing extract from the Reply to the Notice of Appeal the Court has indicated, in parentheses after each subparagraph, the comments made by counsel for the appellant at the start of the hearing:
(A) = admitted
(D) = denied
(NK) = no knowledge
(ASA) = admitted subject to amplification
Appellant's evidence
According to the payer:
[6] The appellant held a competency certificate as an apprentice electrician and had worked for the payer in that capacity before the period at issue.
[7] The payer's son installed cables and wiring but did not handle bids or billing: it was the payer's wife who looked after the accounting; they had previously had other employees but work had dropped off.
[8] At the start of the period at issue the payer's son was unemployed and he hired him to work for his long-time regular customers.
[9] It was either the payer or the general contractors for whom his son worked who supervised his work.
[10] The appellant's working hours were approximately 32 hours a week over four days as [TRANSLATION] "we organized it" so that this would be the case, although [TRANSLATION] "it might run over a bit".
[11] He started work at 7:30 or 8:00 a.m. and his hours varied with the requirements of the business.
[12] When the payer had to deliver houses for July 1, his son had to work more than 32 hours a week but [TRANSLATION] "we always organized it so he would be paid for 32 hours".
[13] To do this he sometimes carried work over from week to week.
[14] The payer's son sometimes worked without pay for 10 to 15 minutes to complete work which was part of a full house installation, such as putting in a last light fixture, just to be of service to the customer.
[15] The appellant had the use of the payer's Econoline van, even in evenings and on weekends, and could use it for personal reasons.
[16] In general the payer paid for the gasoline, but if his son used the truck for personal reasons he had to pay for it himself.
[17] The salary paid to his son was about $14 an hour in accordance with the decree, and the payer supplied him with the large tools necessary for his work.
[18] The payer paid the employer's employment insurance premiums and vacation pay for his son.
[19] If the appellant had not been there the payer may have had to hire another employee on the same terms.
[20] The payer has been operating "Le Coin du Brasseur Enr." since July 1995.
[21] Before then, he went to sites more frequently himself, but after starting this new business he no longer had time to do so.
[22] His customers sometimes contacted his son directly.
[23] At the end of the week the appellant reported to him on his activities.
[24] The appellant occasionally cleaned up the truck.
[25] He sometimes missed a day of work for personal reasons without permission, and when that happened the payer went to replace him if an emergency arose.
[26] The payer signed a statutory declaration (Exhibit I-1) on August 30, 1996. The following appears at pp. 1-2 thereof:
[TRANSLATION]
Sébastien is my son and is slowly taking over the construction business: sometimes he goes to work on sites without being paid. He always has the truck with him and general contractors sometimes call him directly to do a job or repairs. Since he will be taking over, Sébastien is prepared to do this without pay . . . . I cannot guarantee that he does not accept jobs on his own account, but I told him he does not have the right to do so. He does not have his licence . . . . It is possible that Sébastien carries his hours over from week to week, but this involves only a few hours. We agreed that he would be given a paycheque after completing 32 hours.
The following appears at pp. 3-4:
[TRANSLATION]
I do not know whether he worked for nothing or whether he kept track of his time. He may give me hours from last week tonight . . . .
[27] He did not necessarily know when his son was working on sites without pay.
According to the appellant:
[28] He has had his apprentice electrician's certificate since 1989 and has worked for his father since 1991.
[29] It was generally the payer who told him to go work on a particular house, but he also sometimes took work directly on sites where he came into contact with the general contractors.
[30] He generally started work at 8:00 a.m. and at the end of the week he told his father the number of hours he had done.
[31] It might be 31 or 33 hours, but [TRANSLATION] "it balanced out".
[32] He did not perform administrative duties.
[33] The payer occasionally went to sites to see the general contractors.
[34] The appellant paid for gasoline with his father's credit card, but he also bought gasoline for his personal needs when it was low.
[35] He was paid by cheque on a weekly basis (Exhibit A-2), in accordance with the decree, and he did not have the authority to hire staff.
[36] He had no share in the business and was laid off because of a lack of work.
[37] He really did work for his father and has had no problem with unemployment insurance in the past.
[38] He had no log book in which to record his hours of work, but he wrote them down on a slip of paper as and when he did them.
[39] He too signed a statutory declaration, on September 16, 1996 (Exhibit I-2). The following appears in it:
[TRANSLATION]
My father did not know my hours before I gave them to him. We agreed on 32-hour weeks. If I did more or less in a week I arranged for it to balance out from one week to the next. I made no record of the exact dates and hours I worked . . . . I went to visit sites to see when they were ready for wiring. I told my father when it was done and he could bill for it . . . . I always worked alone and my father came to see the sites from time to time . . . . I had my father's truck all the time but I have not had it since last week because I am no longer working. I used it for my personal use and for work. I paid for part of the gasoline because I was often using it more for my personal use . . . . I sometimes did small jobs without pay . . . .
[40] At one time he thought of taking over from his father, but he is no longer interested in doing so.
[41] The payroll (Exhibit A-1) shows that he did in fact work.
[42] The respondent called no witnesses.
Argument
According to counsel for the appellant:
[43] There was an employer-employee relationship between Jean-Roland Bouchard and his son: it is clear that the appellant was an integral part of the payer's business and did not participate in its profits and losses, and it is common in electrical work for apprentices to provide small working tools, which is in fact provided for in the decree. It is true that the control test might cause a problem in the instant case as there was no formal control. However, there was a relationship of trust and the payer could not hire a supervisor to follow his son's activities on sites step by step: the power of supervision nevertheless existed and was exercised when the father went to the sites.
[44] In Isabelle Guilbeault v. M.N.R. (92-269(UI)), I stated the following (at pp. 4-6):
In the argument, counsel for the appellant cited Marcel Perreault v. M.N.R. (93-1736(UI)), in which the Chief Judge of our Court wrote at page 19:
It is therefore my opinion that it is reasonable to contend that the parties would have entered into a substantially similar contract even if they had been dealing with each other at arm's length. There is absolutely no provision in this contract that may be interpreted as granting the appellant preferential treatment or terms of employment unlike those of a contract that would have been entered into between persons unrelated to each other. This contract was negotiated pursuant to the fact that Locajou had added activities to its operations, that is those of its memorandum with Corporation du Parc des Chutes and the animation of outdoor activities. I am satisfied that, if Locajou had not retained the appellant's services, it would have had to retain the services of another individual with qualifications at least equal to those of the appellant, and it is my opinion that it is reasonable to believe that a substantially similar contract would thus have been negotiated.
He contended that the same must be the case in this instance, it having been proved that if the payer had not obtained the appellant's services, it would have had to hire another person and that it was therefore reasonable to believe that a substantially similar contract would thus have been negotiated.
He also cited Freddy Caron v. M.N.R. (A-450-86), in which Marceau J.A. wrote for the Federal Court of Appeal (page 3):
In my view, in considering the situation the judge relied on a concept of control which goes beyond that which is legally required to establish a master-servant relationship.
He referred to Ranjit Darbhanga v. M.N.R. (A-259-94), in which Pratte J.A. wrote for the Federal Court of Appeal:
The decision of the Tax Court of Canada to the effect that the applicant did not hold insurable employment seems to be based on the assumption that, as her alleged employer was sick when she worked for him and could not, for that reason, supervise her work, it necessarily followed that her work had been done under a contract for services rather than under a contract of service. This is an error. A contract may be a contract of service even though the employer does not supervise the work of the employee if he actually has that right. That was obviously the situation here.
I then allowed the appeal and reversed the subject decision.
[45] The Minister should have included the employment and was wrong not to do so.
[46] In subparagraph (h) above he wrote that the appellant did not have an electrician's licence, but he failed to consider the fact that the appellant had a competency certificate as an apprentice.
[47] The Minister relied on the fact that the payer also operated another business, but this is irrelevant to the instant appeal.
[48] The appellant could work 31 or 33 hours a week, but there is nothing unusual about that.
[49] He may have done small jobs without pay from time to time, but this was only to accommodate customers.
[50] As to subparagraph (p) above, there is no evidence that the weeks allegedly worked by the appellant do not correspond to the weeks actually worked.
[51] Nor, except perhaps for very rare cases and minor jobs, is there any evidence that the appellant did electrician's work on his own account.
[52] The salary was that fixed in the decree and if the appellant had not been there the payer would have had to hire someone else to do his work.
[53] The evidence available to the Minister was insufficient to support the conclusion he reached.
According to counsel for the respondent:
[54] On the issue of control, the father's other business kept him quite busy and he did not go to sites often: he let the general contractors supervise his son's work in his place, and his son became, in short, more of a contractor than he was himself.
[55] My decision in Guilbeault was rendered before Attorney General of Canada v. Jencan Ltd. (A-555-96) and Her Majesty The Queen v. Bayside Drive-In Ltd. (A-626-96 to A-629-96).
[56] In order to include the employment the Minister had to be satisfied that it was reasonable to conclude that Jean-Roland Bouchard and his son would have entered into a substantially similar contract of employment if they had been dealing with each other at arm's length, and he really did not have enough evidence to reach such a conclusion.
[57] The appellant worked alone, he only noted his hours down on a slip of paper and it was he much more than the payer who controlled the business.
[58] Hours were carried over so as always to arrive at 32 hours a week.
[59] The appellant did work without pay and an unrelated employee would not have done so.
[60] He used the truck for personal reasons.
[61] The statutory declarations make it clear that the employment was not insurable.
[62] The son had plenty of room to manoeuvre.
[63] Overall, the Minister had sufficient evidence to conclude as he did and he did not take any irrelevant factors into account.
Analysis
[64] The Minister admits that the appellant held employment as an apprentice electrician with the payer, and the question to be decided is whether that employment, initially excluded, should now be included.
[65] To arrive at the conclusion below, there is no need to consider the fact that the payer had no registered trade name.
[66] The appellant was entitled to work as an apprentice electrician but there was almost no control, and this was clearly a very important factor in the subject decision.
[67] It is not important that the appellant was the payer's only employee.
[68] There is no doubt that hours were carried over and work done without pay, and the Minister was right to take this into account.
[69] As a result of this carrying over of hours, it is clear that the weeks allegedly worked by the appellant do not correspond to the weeks actually worked, and this is a very important factor.
[70] The appellant could use the payer's truck for personal reasons, and an unrelated person certainly could not have done that.
[71] In his statutory declaration (Exhibit I-1) the payer said he could not guarantee that the appellant did not accept jobs on his own account, and the Minister was also right to consider this fact.
[72] Were it not for the fact that the appellant and the payer were not dealing with each other at arm's length, the appellant would not have been hired to do the same work on similar terms.
[73] The Court wishes to add the following further considerations:
(a) it does not matter that the son did not handle billing or bids or that he was unemployed before the period at issue;
(b) the payer should have supervised his son rather than generally leaving control to the general contractors;
(c) the facts that the salary was that fixed by the decree, that the large tools were supplied by the payer and that employment insurance premiums were paid did not necessarily make the employment insurable;
(d) it is not normal that the appellant could take time off work without permission for personal reasons, and an unrelated employee certainly would not have been given such favourable treatment;
(e) the statutory declarations enabled the Minister to decide as he did;
(f) the appellant said that when his father went to the sites it was to see the general contractors;
(g) he bought gasoline for his personal purposes only when the tank was low;
(h) the facts that the appellant had no authority to hire staff and had no share in his father's business do not suffice to make the employment insurable;
(i) the fact that he has had no problem with unemployment insurance in the past clearly does not give him a vested right;
(j) he said in his statutory declaration that he always worked alone;
(k) though he did think at one time that he would take over from his father, he later gave up this idea;
(l) the lack of control is not just a minor problem but is the main reason why the employment was found not to be insurable; and
(m) the father may certainly have supervised his son, but with his new business he had completely lost interest in his electrician's business and as a result it was the appellant who really controlled the business.
[74] In Jencan Ltd., supra, the Chief Justice of the Federal Court wrote the following for the Court of Appeal at p. 23:
In other words, it is only where the Minister's determination lacks a reasonable evidentiary foundation that the Tax Court's intervention is warranted. An assumption of fact that is disproved at trial may, but does not necessarily, constitute a defect which renders a determination by the Minister contrary to law. It will depend on the strength or weakness of the remaining evidence. The Tax Court must, therefore, go one step further and ask itself whether, without the assumptions of fact which have been disproved, there is sufficient evidence remaining to support the determination made by the Minister. If that question is answered in the affirmative, the inquiry ends. But, if answered in the negative, the determination is contrary to law, and only then is the Tax Court justified in engaging in its own assessment of the balance of probabilities.
[75] There is sufficient evidence remaining in the instant case to support the Minister's decision.
[76] The appeal must therefore be dismissed and the subject decision affirmed.
Signed at Laval, Quebec, June 19, 1998.
"A. Prévost"
D.J.T.C.C.
[OFFICIAL ENGLISH TRANSLATION]
Translation certified true on this 7th day of December 1998.
Stephen Balogh, revisor