Date: 19980814
Dockets: 97-2053-UI; 97-2054-UI
BETWEEN:
ALMAS THIBEAULT, COOPÉRATIVE FORESTIÈRE DE GIRARDVILLE,
Appellants,
and
THE MINISTER OF NATIONAL REVENUE,
Respondent,
and
COOPÉRATIVE FORESTIÈRE DE GIRARDVILLE, ALMAS THIBEAULT,
Interveners.
Reasons for Judgment
Tardif, J. T.C.C.
[1] These are appeals from a determination by the respondent dated October 31, 1997, that the work claimed to have been performed by the appellant, Almas Thibeault, from May 4 to July 10, 1992, for the Coopérative Forestière de Girardville was not so performed pursuant to a contract of service meeting the criteria laid down in the Unemployment Insurance Act (the "Act") with respect to insurability.
[2] To support his allegations, the appellant called Mr. Jacques Verrier as a witness. Mr. Verrier indicated that he had been directing the Coopérative Forestière de Girardville (hereinafter the "Coop") as chief executive officer for more than ten years. During the period at issue, this workers’ cooperative carried on several business activities related to the forestry industry.
[3] The Coop was, therefore, an umbrella for an organization that conducted several activities related to the wood industry. In total, the company had a turnover of more than $20 million. The total payroll represented more than $5 million and was divided among approximately 500 workers.
[4]Jacques Verrier explained that, given the range of related operations carried on by the business, they felt impelled to round out their activities by adding sawmilling and wood chip production. In expanding into these new areas of activity, the board of directors opted to proceed by purchasing an existing business.
[5] After having acquired such a business, the Coop learned that this business which, until then, had been the property of the appellant’s family, was in grave financial difficulty to the point where it had availed itself of the provisions of the Bankruptcy Act.
[6]Following an in-depth assessment of the situation and after that business's proposal had been accepted by its creditors, the Coop acquired all the shares held by the appellant's family for a nominal consideration of one dollar.
[7] The Coop then paid $248,861 in settlement of all debts, which amounted to $691,007 (Exhibit A-2). The Coop thus acquired assets whose value was much greater than the amounts paid. This transaction also allowed the appellant to be freed of all his liabilities and made it possible to save a number of jobs.
[8] The witness then explained why the Coop decided to offer the appellant employment at a weekly salary of $640.
[9]According to the witness, there were significant assets and their value was considerable. Having decided as a result of feasibility studies not to continue sawmilling on this site, the Coop decided to carry out a demolition and to close down the site which, according to the witness, required the constant presence of a watchman. The appellant had also worked as a watchman during a period of employment prior to the one at issue.
[10] Apart from the work as a watchman, Mr. Verrier justified hiring the appellant on the basis of the need to have available a qualified resource person to advise the Coop during the transition and to help in the development of this new activity, with which the appellant was very familiar.
[11] The witness was never able to define precisely the work the appellant was performing, and even went as far as to claim that he had some sort of moral obligation towards the appellant. To justify the size of his salary it was alleged that the appellant held the function of advisor or consultant, but this allegation was clearly difficult to prove as the transition had already been completed; moreover, it was becoming difficult, if not impossible, to demonstrate the need for such work for such a short period of time. This would have required relating the hiring and the layoff to specific facts, but none were forthcoming.
[12] On several occasions, Mr. Verrier fell back on the Coop's social role within the community, its aim being to create jobs and not to eliminate them. He also vigorously argued that his business seemed to be the object of systematic harassment, indeed discrimination, on the part of the authorities.
[13] The cross-examination, which was clearly aimed at destroying the credibility of the witness, disclosed that the Coop had been the subject of a sweeping investigation dealing with all kinds of irregularities concerning certain separation certificates issued by the Coop, which he managed.
[14] Mr. Verrier gave his version of the facts. He explained that he had entered a guilty plea after lengthy negotiations following the investigation. He admitted that the Coop had in fact sometimes combined days worked, a practice commonly called "hour banking", which was obviously prohibited. Its purpose was to increase the qualifying periods and, consequently, the amount of unemployment insurance benefits.
[15] The appellant completed the evidence with his own testimony. He was old and handicapped by poor hearing, and his testimony was brief and very vague regarding his job description.
[16] The appellant Almas Thibeault, to the great astonishment of his own counsel, agreed that the very long interview he underwent at his home in the course of the wide-ranging investigation had been conducted in a normal fashion, thereby nullifying any attempt to cast doubt on that interview's evidentiary value.
[17] The interview with Mr. Thibeault, conducted by the investigator and an officer of the R.C.M.P., ended with a statement that Mr. Thibeault initialled and signed several times. This statement was obtained after a visit to Mr. Thibeault's home, which started at approximately 7 a.m. and ended in the early afternoon only after a search warrant had been executed there. The statement was written after the interview and was drafted in Question and Answer format. I believe that it is useful to reproduce it here (Exhibit I-4):
[TRANSLATION]
Q. Mr. Thibeault, have you ever run a business and, if so, what sort of business was it?
A. Scierie A.T. Inc., a company of which I was the principal shareholder; that company operated a sawmill, held government timber rights, felled trees and transported timber.
Q. When did A.T. Inc. start and end its operations?
A It started them at the end of February 1981 and ended them in July 1990.
Q. For what reason did A.T. Inc. stop its operations in July 1990?
A. We no longer had the sawmill for the lumber (aspen) and for the wood chips.
Q. What happened to the sawmill and timber rights of A.T. Inc.?
A. Everything was transferred to the Coop de Girardville, in other words, the sawmill, the timber rights, all the machinery, and a large garage.
Q. With whom did you negotiate the transfer of A.T. Inc. to the Coopérative Forestière de Girardville?
A. With Mr. Jacques Verrier.
Q. Did you withdraw any sum of money as a result of the transfer of the sawmill, timber rights and machinery of A.T. Inc. to the Coop de Girardville?
A. No sum of money was withdrawn but, at some point, Mr. Jacques Verrier offered me a salary to watch the garage and the machinery which were in the yard behind my principal residence. There was also the sawmill, which was in the same place and was moved in March 1992.
Jacques Verrier told me that he would pay me a salary without specifying the amount. I received my first pay cheque towards the end of December 1990.
Q. What were your duties, functions and hours of work?
A. I watched the machinery in the sawmill yard, the garage. I had no set hours of work. I was keeping an eye out from inside my private residence a lot. Moreover, when I took walks-half to three quarters of an hour a day-I used the opportunity to do some watching.
Q. Was there any control of the work you performed, either by a foreman or someone else from the Coopérative Forestière de Girardville Inc.?
A. No.
Q. Did you do any watching at night?
A. No.
Q. Did you continue to perform the duties of watchman between April 27, 1991 and May 3, 1992?
A. When I was on unemployment, I took the same walk for my health.
Q. Between July 1990 and December 9, 1990, did you perform the duties of watchman?
A. Yes, I went around from time to time during the walks that I took for my health, and kept an eye on things.
Q. Were you the only watchman?
A. Yes.
Q. Were you replaced at any time by another person?
A. No.
Q. Having owned a company, would you have paid a $640 gross salary per week to do the same watchman's work that you were doing?
A. No.
Q. Was it you who filled out and signed claims for unemployment insurance from 1991 to 1992 as well as the claimant reports pertaining to these claims?
A. Yes.
Q. How did the Coop pay you?
A. By cheque, once a week. I endorsed it and cashed it at the Caisse Populaire in Girardville, account number 428.
Q. Was there an agreement between you and Jacques Verrier concerning getting a record of employment?
A. Not as such, but Jacques Verrier told me that he would pay me a salary until I got my pension because I was 63 years old at the time.
Q. Who initiated this agreement?
A. Jacques Verrier.
Q. Did you know that this was illegal?
A. No, but I couldn’t say it was proper either.
Q. What were your real intentions when this agreement was proposed to you by Jacques Verrier?
A. To get by until my pension.
Q. Why did you work 20 insurable weeks from December 10, 1990 to April 26, 1991 and ten insurable weeks from May 4, 1992 to July 10, 1992?
A. Because that’s what it took to get stamps.
Q. Were you informed of your rights and obligations as well as possible consequences to your benefits for 1991 and 1992?
A. Yes.
Q. Why was your record of employment dated April 26, 1991 issued by Scierie A.T. Inc. instead of the Coopérative Forestière de Girardville?
A. Probably because the Coop was operating under Scierie A.T. Inc.'s name for a certain period.
Q. Do you have anything else to add to this statement?
A. No.
Q. Have you indicated that agent Trudel should write your answers for you in this statement?
A. Yes.
End of interview at 1.11 p.m. 96/11/20
[18] For his part, the respondent called as witnesses Mr. Réal Couture and Mr. Michel Maltais, both associated with the investigation of the Coop. Their testimony brought to light that the Coop had been the object of a major investigation and that the appellant's dossier had been one element of this investigation.
[19] Mr. Couture explained that he reacted when he saw that the periods of work corresponded exactly to the number of weeks necessary to qualify for unemployment insurance benefits. These were paid until they ran out, which was followed by a return to work, shorter this time but exactly long enough to requalify. There was also the matter of the large salary paid for work as a watchman.
Analysis
[20] To receive unemployment insurance, now called employment insurance, the work must be performed within the framework of a genuine contract of service. The following criteria have been identified in the case law as elements of a contract of employment: a relationship of subordination giving the payer a power of control over the work performed by the employee, the chance of profit and risk of loss, ownership of the tools and integration.
[21] The application of these criteria to the facts available obviously facilitates the exercise of characterization. On the other hand, it is just as important that there be genuine employment, without which the exercise of applying the criteria is completely useless.
[22]Genuine employment is employment remunerated according to market conditions, which contributes in a real and positive way to the advancement and development of the business paying the salary in consideration of work performed. These are basically economic factors that leave little, if any, room for generosity or compassion.
[23]Contributing to the regional economy, creating and protecting jobs, being a good corporate taxpayer, being concerned with important and fundamental environmental questions, being a worker-owned business, being a small or medium-sized business with no, or very little, access to the capital market, being concerned with regional development, having a purpose and mission focused more on human values than on capital, are certainly exceptional and eminently worthy qualities which one cannot fail to approve. Such qualities, no matter how noble, cannot, however, justify or explain non-compliance with the provisions of the Act. Whatever Mr. Verrier, or any others who believe they are being harassed and persecuted, might think, all-whether individuals or corporate entities-are equal under the Act.
[24] In this case, the evidence is that the Coop showed much kindness toward the appellant. The appellant no doubt deserved this kindness for his great contribution to the economic development of his region.
[25] It was permissible for the Coop to be generous and to be enthusiastic about easing the economic situation of a person whose age would no doubt be an impediment to retraining or finding new employment. However, it could not unilaterally involve the State in its scheme, no matter how noble and generous.
[26] The unemployment insurance scheme is a social program whose aim is to support those who lose a real job. It is definitely not a scheme under which it suffices to pay premiums for a certain period of the year in order to have automatic entitlement to benefits.
[27] It is an insurance scheme under which all the known conditions defined by the Act and its regulations must be respected or else the person who has paid the premiums cannot claim automatic entitlement to the payment of benefits.
[28]Generally, the entitlement to benefits under an insurance contract must be based on facts over which the potential beneficiary has no control.
[29] Of course, it is neither illegal nor reprehensible to organize one’s affairs so as to profit from the social program that is the unemployment insurance scheme, subject to the express condition that nothing be misrepresented, disguised or contrived and that the payment of benefits occur as a result of events over which the beneficiary has no control. Where the size of the salary bears no relation to the economic value of the services rendered, where the beginning and end of word periods coincide with the end and the beginning of the payment period and where the length of the work period also coincides with the number of weeks required to requalify, very serious doubts arise as to the legitimacy of the employment contract. Where the coincidences are numerous and improbable, there is a risk of giving rise to an inference that the parties agreed to an artificial arrangement to enable them to profit from the benefits.
[30] In this case, not only are the coincidences great and very numerous, the size of the salary has never been justified in a proper and reasonable manner.
[31]Moreover, the fact of having sought to justify the reasonableness of the salary by adding ambiguous duties described as those of advisor or consultant has, in a way, devalued the work as a watchman.
[32] If we add to this combination of rather revealing facts the appellant's answers to the questions put to him during the above-mentioned meeting-that went very well, by the appellant's own admission-and if we top all this with the flexibility and generosity of the directors of the Coop, there can be only one conclusion: this was an arrangement between the appellant and the Coop whose purpose was primarily to qualify the appellant for unemployment insurance benefits. The performance of the work as a watchman and the availability of the appellant for that work were not essential conditions for the payment of his remuneration.
[33] I do not doubt that the appellant was attentive and vigilant on the grounds of the former family business. However, that does not justify such a salary and the evidence that this important duty had to be performed in a sporadic manner did not convince me that watch did not need to be kept outside of working hours. Moreover, I am convinced that the appellant's function of advisor or consultant was artificial and exaggerated as a person cannot act in such a capacity for limited periods of time. Thus, we are dealing here with specific contracts whose length and, especially, content, are clearly defined. There were no concrete examples provided of the appellant’s expertise being called upon.
[34] While the banking of hours worked or the grouping of jobs may be possible and justifiable for the director of the Coop, these practices are neither possible nor reasonable with respect to the work of watchman or consultant.
[35] I conclude, therefore, that the duties established from the evidence of the appellant were not performed pursuant to a genuine contract of service. In my view, this was a generous arrangement under which the principal payer was the State.
[36] The appeal is therefore dismissed and the decision of the Minister is confirmed.
Signed at Ottawa, Canada, this 14th day of August 1998.
"Alain Tardif"
J.T.C.C.
[OFFICIAL ENGLISH TRANSLATION]
Translation certified true on this 29th day of January 1999.
Erich Klein, Revisor